Cape Argus - - MONEY - LOURENS COET­ZEE Lourens Coet­zee is an in­vest­ment pro­fes­sional at Mar­riott As­set Man­age­ment.

MAIN­TAIN­ING your life­style in later years should be the core ob­jec­tive of your in­vest­ment plan. How­ever, to achieve this, you are of­ten re­quired to ad­just your life­style to­day so that you are not forced to have to do so in the fu­ture.

Em­ploy­ees gen­er­ally con­trib­ute to com­pul­sory pen­sion or prov­i­dent funds through their em­ploy­ers. More of­ten than not, em­ploy­ees know only their mar­ket value and have no idea how much in­come their sav­ings will give them when they re­tire.

It is crit­i­cal to know what in­come will be gen­er­ated from your ac­cu­mu­lated sav­ings when you are no longer work­ing.

Fur­ther to this, in­come must be con­verted into a present day equiv­a­lent, as the pur­chas­ing power of in­come is af­fected by in­fla­tion over time.

By con­sid­er­ing your fu­ture level of in­come in to­day’s terms, you can gauge whether it will be suf­fi­cient to sus­tain your de­sired life­style. Should this not be the case, you will need to make ad­di­tional vol­un­tary con­tri­bu­tions into ei­ther a re­tire­ment an­nu­ity or dis­cre­tionary prod­uct such as a unit trust.

One of the most tax ef­fi­cient means of sav­ing out­side of an em­ployer pen­sion fund is through a re­tire­ment an­nu­ity (RA). Not only is the in­come earned ex­empt from all forms of tax, but the con­tri­bu­tions made are tax-de­ductible, sub­ject to cer­tain lim­its.

While the in­come earned from these sav­ings is fully tax­able when be­ing drawn in later years, 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.

Con­tri­bu­tions to an RA are flex­i­ble and it is there­fore pos­si­ble to con­trib­ute monthly or to in­vest an an­nual lump sum be­fore the tax year-end in Fe­bru­ary. Con­se­quently, it is well suited to self-em­ployed in­di­vid­u­als or com­mis­sion earn­ers who do not be­long to a com­pany pen­sion or prov­i­dent fund, or have a vari­able monthly in­come.

It is vi­tal to un­der­stand that when you are in­vest­ing in RAs and pen­sion funds, you are do­ing so for in­come. The in­come you earn from these in­vest­ments will fund your life­style in the fu­ture.

This in­come, there­fore, should be re­li­able and pre­dictable, which will help you to plan with more cer­tainty. How­ever, how does an in­vestor en­sure that his or her in­vest­ments will pro­duce this de­pend­able in­come?

To as­sist in­vestors in this plan­ning process, Mar­riott has de­vel­oped a unique on­line in­vest­ment plan­ning tool.

When trans­fer­ring an in­vest­ment into, or mak­ing a new in­vest­ment in the Mar­riott Re­tire­ment An­nu­ity, this tool will be able to demon­strate not only the in­come cur­rently gen­er­ated by that in­vest­ment, but will also re­flect a rea­son­able ex­pec­ta­tion of the monthly in­come gen­er­ated and the cap­i­tal value at the in­vestor’s cho­sen fu­ture re­tire­ment date.

This is based on the prin­ci­ple that Mar­riott only in­vests in re­li­able in­come streams.

By know­ing this in­for­ma­tion and be­ing able to rely on it with more cer­tainty, you will be able to ad­just your life­style to­day so that your fu­ture life­style is not left to the whims of the stock mar­kets or the hope of phe­nom­e­nal fu­ture re­turns.

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