Ensuring the golden years
Knowing whether you have saved enough for retirement is one of the primary causes of financial anxiety for pre-retirement investors.
In order to plan for retirement, it is important to filter out the “noise” and focus on the information you really need to know.
How much income will my savings generate in retirement?
If the income element of an investment could be reliable and consistent, then the future outcome of that investment could be predicted with a high degree of certainty.
This information – the income produced by an investment – is the key to knowing whether you are saving enough today to sustain your future.
A study in the Harvard Business Review, late in 2014, stated that “our approach to investing is all wrong”.
We need to think about monthly income, not net worth”.
The successful implementation of an income-focused investment strategy requires a choice of investments or securities that produce reliable income regardless of economic conditions or market volatility.
Typically, the type of investments which demonstrate this ability are companies which focus on basic necessities, enjoy countrywide distribution and have strong balance sheets.
These companies tend to fare well in both recessionary and growth phases of the economic cycle and are seldom at the mercy of a new idea, trend or fashion.
Shoprite is a good example of a company with these attributes.
One of the most tax-efficient means of saving for retirement outside of the workplace is through a retirement annuity.
Not only is the income earned exempt from all forms of tax, but the contributions made are deductible, subject to certain limits.
While the annuity earned from these savings is fully taxable during retirement, the benefits of tax-free capital accumulation from the re-investment of income, coupled with a likely lower marginal tax rate on retirement, makes this a highly tax-efficient savings vehicle.