As citizens of the western world, we all highly value our independence. We’re taught from an early age to be determined, educated and strive for individual success. So, when life deals us a few rough hands, which it often does, it can be very disappointing if you end up needing to depend on your family for accommodation during your retirement years.
In this article, we go back to the very basics and the need to invest from the start of your career so that the living arrangements you form with your family can be by choice and not a necessity.
The sandwich generation
We’re all familiar with the generational terms millennials and baby boomers, but not necessarily so for the sandwich generation. This is a generation, usually in their 40’s and early 50’s, who care for their aging parents while supporting their children. They’re sandwiched as caregivers and providers for the generation ahead and below. Needless to say, this is very stressful for the provider and also hard on those who have lost their independence.
The earlier the better
One of the best ways to secure your independence is to invest from the very start of your career. The taxman has recently changed the rules and you’re now able to deduct up to 27.5% of your income for contributions towards retirement funds such RA’s and pension funds. Not only are the contributions tax-deductible, but there are no dividends withholding tax, CGT or tax on interest within these funds which effectively accelerates the growth.
A contribution amount of 27.5% of your income towards a retirement fund sets an excellent standard for the amount to invest to secure your independence during retirement.
Great growth with some flexibility
Tax-Free Investments have also recently been introduced to encourage retirement savings. You can contribute up to R 33 000 per year up to a maximum of R 500 000 in your lifetime. There’s also no tax levied on the growth within the funds.
The contributions to Tax-Free investments don’t have the advantage of being tax-deductible, but they do allow you some flexibility in that you can access the funds before the age of 55 should you have a crisis and need to do so. They’re also not bound by regulation 28 as RA’s are, which means they can include a higher offshore exposure to reduce currency risk.
Do remember that if you make contributions more than R 33 000 per year, the taxman will take a 40% cut on the excess amount. Also, if you withdraw funds, you cannot ‘make them up again’.
Model your retirement
If you still have funds to invest after taking full advantage of the tax deduction towards a retirement fund and Tax-Free investments, you can also invest in one of our discretionary Kanan Wealth model portfolios geared for long-term growth. These models have been researched and constructed in conjunction with Fundhouse, one of the leading investment research companies in South Africa.
The models suitable for retirement include:
- The Retirement Wealth Builder (SA multi-asset high equity for investors saving for retirement within a fund bound by Regulation 28)
- The Capital Accelerator (SA general equity for investors who wish to outperform equities in the long-term)
Walk the talk as a business owner
If you’re a business owner, you can set an example for taking responsibility for investing for retirement and implement a group scheme for your employees. As well as the apparent benefits of demonstrating care and reducing stress levels, group retirement schemes are known to:
- Motivate staff,
- Assist in attracting the best employees, and
- Promote loyalty.
Group schemes can also include a life cover component including income continuation benefits which will allow your staff to maintain their standard of living should they become unwell.
We provide group retirement solutions in conjunction with our partners Allan Gray, Discovery and Liberty. We’re also able to provide general financial advice to each of your employees.
Our dedication to your golden years
At Kanan Wealth we’re dedicated to assisting you to achieve your independence in retirement so that you don’t end up being the top layer in a stressful sandwich family. We’ll provide you with a full retirement financial needs analysis which takes all your assets into account, including your retirement funds and others such as a business or property earmarked as retirement capital.
Please do email me at email@example.com if you’d like to review your retirement plan or establish a group scheme for your employees.