Investment principles and planning remain key to making your income last throughout retirement

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BUSINESS NEWS - A regular question or concern that many retirees are faced with is: How do we make our income last throughout retirement?

Below we will discuss some key points for consideration in what your overall strategy should be.

1. Plan for a reasonable number of years in retirement
Planning for a long retirement is very important to sustaining your income.

To give yourself an 85% chance that you have planned for enough years and will not outlive your planning horizon, research suggests that you should plan for approximately 40 years at age 55, 20 to 25 years at age 65, through to 10 to 15 years at age 85; these projections take into account the average life expectancy.

2. Invest for real returns above inflation
You need to understand what level of real returns are required to sustain your required level of income for the duration of your retirement.

First and foremost, you need to ensure that you have an appropriate exposure to growth assets. Growth assets like equities are essential for real returns. You would need a minimum of 50% exposure to growth assets and diversification across asset classes are just as important.

Very few people would have predicted the strong performance from the JSE in the last 12 months, and the stronger rand levels that we are currently experiencing. Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk. Having adequate exposure to both local and global markets and other asset classes such as bonds and cash, remains the key ingredient for achieving investment goals.

3. Controlling what we can control
Manage periods of volatility through an appropriate amount of diversification, historically in the region of 30 – 50% in growth assets, and through good quality active management of your assets.

At PSG Wealth Outeniqua we therefore look at the things we can control.

4. Draw a reasonable level of income
If we follow a sound investment strategy and planning process, with 30 years of income required, starting drawdowns in the region of 4% to 4.5% and below has an excellent probability of success.

Beyond this range of 4% to 4.5% drawdowns, the probabilities of success will start to decrease.

5. Work with a Financial Adviser
A financial adviser can provide you with objective advice and help you make informed investment decisions. This will also help you develop a long-term investment plan that aligns with your goals and risk tolerance.

“Successful investing takes time, discipline, and patience” - Warren Buffet

For further information contact tour office on T: 044 802 7100 or

Adriaan de Waal
Wealth Manager
C +27 (72) 591 4557
Email - adriaan.dewaal@psg.co.za

Janko Sieberhagen
Wealth Manager
Call - +27 (79) 731 1388
Email - janko.sieberhagen@psg.co.za

Our office details in the Garden Route:

Mossel Bay Diaz
Sioux Building, 16 Sioux Street, Mossel Bay Mossel Bay | www.psg.co.za/mosselbaydiaz
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George
Central Dynarc House, 2nd Floor, 31 Courtenay Street, George | www.psg.co.za/georgecentral
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