Welcome to The Retirement Warehouse

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Retirement can be a nightmare, my plan is to make it your dream ...

My aim is to provide you with all the tools you need to know exactly how you should plan your retirement. Many people don't have a successful plan to retire, don't leave it all to the last minute, and realise that you should've started planning 30+ years ago. It is my intention to make you one of the lucky ones who will retire comfortably!

The Retirement Myth...

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The 15 % retirement myth.

There are many “numbers” the financial services industry accepts as fact. Short-term insurers believe two thirds of the country’s vehicles are uninsured. Retirement planners reckon only six out of every 100 citizens will save enough to enjoy full financial independence through retirement. And the retirement funding industry parades 15% as the magic monthly contribution to “guarantee’ this independence. John Williams of The Retirement Planning Bureau summarises the long held view: “It’s often reported that if a person saves 15 % of their earnings over a working lifetime (say 35 years) they will be able to retire in style.” But the assumption doesn’t always hold. “This is a useless and unhelpful bit of actuarial rhetoric, because it rarely, if ever, pans out that way,” he says.

One of the biggest problems facing the so-called 15-percenters is how much of their monthly contribution actually goes to retirement funding. Williams says the reality is most group schemes allow for deductions to death and disability benefits which become progressively more expensive as the employee gets older. Over the 35 years a decreasing portion of the 15% “pension fund” contribution actually makes it to the retirement funding pot. So you might be contributing 12.5% when you begin saving only for this to taper off to 10% or less in the years pre-retirement. Why has the industry cast the 15% gross saving number in stone?

Forget the bullets and focus on the target

The financial media is partly to blame. At the industry’s behest we’ve repeatedly touted this number as the optimal long-term retirement fund contribution. I’ve been to dozens of retirement funding presentations and cannot recall one where “15% over 35 years with full preservation” wasn’t trotted out as the retirement funding “cure all”. The South African Revenue Services (SARS) have played their part in perpetuating the 15% myth too. “The law allows someone who is not in retirement funding employment – not a member of an employers’ retirement fund – to contribute, as a tax deductible payment, 15% of their non-pension earnings into a retirement annuity,” notes Williams. We believe 15% is enough because everyone tells us it is, and because SARS gives us zero benefit for saving more...

But we’ve become so obsessed with the retirement savings mechanisms (our monthly retirement contributions and financial instruments used to squeeze out market-beating return) that we’ve lost sight of the retirement savings goal (the target). Instead of focusing on the magical 15% monthly contribution we should be setting ourselves a savings target – an amount of capital we hope to accumulate upon retirement – sufficient to meet both capital and income needs. The foundation for any successful retirement plan is for the individual to know their desired income and capital upon retirement!

There’s no quick fix for your retirement plan. Your success depends on the correct mix of just three factors: time, rate of savings and return spot on. The only way to increase the amount of capital available to you upon retirement is to “improve” one or more of these factors. You can begin saving earlier (more time in the market), save more (increase your monthly retirement funding contribution beyond the accepted 15%) or generate better returns. Two of these factors are entirely in your own hands – to rely on improved market returns to make up your retirement funding shortfall is nothing short of financial suicide.

Easy calculation – tricky variables

Because time to retirement is generally a given (how many years until you’re 65) it’s quite easy to calculate the monthly savings rate required to deliver a predetermined capital outcome. The tricky part is making sure you plug in reasonable estimates of investment return and inflation. Upon completing this exercise – erring on the side of caution where return and inflation forecasts are concerned – you’ll soon discover the 15% requirement is a total myth. In William’s experience the actual contribution required comes in somewhat above the “accepted” standard.

A comfortable retirement requires a changed mind-set. “Most present day retirement planning is based upon what a person is prepared to invest rather than on what they need to invest,” opines Williams. “Small wonder then, that so many suffer a significant financial shock at retirement!”

Editor’s thoughts: I like John William’s “target focus” when it comes to retirement planning. It makes sense that the capital required upon retirement is the primary focus, and that we calculate a sensible monthly contribution based on that target rather than industry say so... Are you one of the 15-percenters mentioned in the story – and do you think you’re saving enough for retirement

Our Services

 

  • Short Term Insurance
  • Death and Disability Cover
  • Retirement Planning
  • Investment Planning
  • Estate Planning



Choosing a retirement home

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Do your homework before committing You'll probably be happiest with your retirement community if you do plenty of research first to ensure you've made the right choice.
Once you've got that background, you can:
* Pay in-person visits to the facilities you're considering. Many retirement communities encourage potential residents to stay overnight and have meals in the dining facility.
* Talk to residents. Take the tour that's offered, but also try to stroll around on your own and talk to as many people as you can. A few spontaneous conversations can give you a far better feel for a place than a canned tour.
* Check out the assisted living and nursing facilities. You'll want to make sure these areas are pleasant, clean and not isolated from the rest of the community.
* Review the contract. When you join a retirement community, you sign a long-term agreement that spells out what you're paying for, from the size and location of your apartment to how many meals are included in your monthly fee. Items like maid service, laundry and transportation may be part of the package, or you may have to buy them a la carte. Ask for the fee schedule for services that are provided but not covered by your monthly payment.