The current government pension is R1780 per month, if a person does not adequately save for retirement this small sum of money would have to be utilized to purchase groceries, electricity and other utilities. This is why retirement planning is crucial. By utilsing retirement planning an individual can be financially independent instead of relying on the government or relatives when they retire.
There are 3 stages of retirement planning namely:
A person planning for retirement will seek advice from a financial planner on what investment vehicles can be utilized in order to attain sufficient retirement capital on their retirement date.
In order to have sufficient retirement capital there are different retirement vehicles an individual can utilize.
When you are close to retirement you can ask your financial planner to explain the tax implications that will affect your retirement benefits. At retirement your financial planner will advise you on the following:
At retirement you will receive a payout from your pension fund and or retirement annuity. Two-thirds of this payout needs to be reinvested in an income generating annuity.
There are two types of income generating annuities namely:
Also described as a type of “personal pension plan”, the income that is generated from a living annuity is not guaranteed, but relies on the performance of the funds that the capital is invested in.
Investors will invest at least two-thirds of the portion they receive from their pension or retirement annuity, or the portion they’ve decided to invest from their provident fund, in this living annuity. You will be able to choose how much money to take as an income, based on a predetermined minimum and maximum amount.