BRING ON THE END OF THE WORLD
As a 66+ senior citizen contemplating retirement in the near future, I read Wim Wijenberg’s “Maybe Not That Great?” letter in the 29th November edition of Finweek with great interest.
On the one hand I have a f inancial services planner, offering me a choice of pension packages ranging from large fixed monthly sums to smaller inf lationlinked monthly sums.
On the other hand I have a private bank f inancial adviser preferring the living annuities option, possibly to link it back to something else when interest rates improve.
Whichever direction I choose, I’m told it will cost me more than R12 000 a year, or over R1 000 a month in fees – a healthy prospect for any adviser but not so great for me !
Taking Wim’s comment regarding the do-it-yourself method, it sounds ideal on the surface, but how long can it last – when I’m in my eighties or nineties will I still be intelligent enough to look after myself f inancially or, if I’m still around, will I be dribbling into my gruel?
I accept that there will never be a “one-package-f its-all” ideal but it seems to me that every “specialist” in retirement planning has a different approach.
Let’s hope that the Mayans had the right idea and by next week we won’t need to worry any more, the world will have ended and I will have saved myself R1 000 a month.
Geoff Posnack Finweek responds: Thanks Geoff, it’s a very nice question and one I think a lot of people spend a great deal of time considering.
Before we get on to the fees, maybe I can simplify the response a little bit.
Rule number 1: Don’t lose your initial
Rule number 2: It’s only an investment if it delivers a return greater than inflation. Rule number 3: Try not to give any of it to the taxman.
Sure, these rules are simple but if you remember them, it can guide a lot of your decision making without over-complicating anything. If you are planning to go the DIY investing route then remember that you cannot afford to lose your nest-egg and you have to be brutal on yourself about whether it is actually delivering a positive return on investment.
If you are going direct, you have to calculate your after-tax return. I put your question to a couple of f inancial planners and they made the following suggestions:
1. You can go direct and cut out the advisor (if you feel confident and able to do this on your own).
2. Negotiate the fees with the planner/ adviser – these could be both the initial fees and/or the on-going fees – these are not cast in stone. You should also establish exactly what it is that he’s paying the “R12 000” for.
3. Finding a planner who will do the work for you on a “project” basis with no ongoing advice fee and where he can consult with the planner on an as-and-when basis.
4. As part of that fee, you should be getting consultation and advice, not just a productlinked fee.
Fingers crossed that the Mayans got it wrong.
Thanks for the great question.