Did you know that only 6% of South Africans save up enough to retire comfortably? It is most likely because most of us think that retirement savings is something to worry about when you are older. Not so….

In the following example, we explain how compound interest can boost your retirement savings if you start to save for retirement in your first job and while you are still young.

Let’s say that Siya is starting in his first job and he plans to save R500 per month.

If he received a return of 10% per year, Siya would have about R3,100,000 saved in 40 years’ time. If Siya stopped saving after just 30 years then the amount amassed would be only R1,100,000, which is about a third of what it would have been at year 40.

If he stopped saving after 20 years, the value of his savings would be only R380,000, about a third of what it would have been after 30 years. If he stopped saving after 10 years, he would have only R100,000; less than a third of what he could have had after 20 years.

It seems that the level of Siya’s savings trebles every ten years. How can that be?

The answer lies in the power of compounding. By leaving his money invested, Siya is able to earn income on the income that is generated by his savings. The longer that this is allowed to take place, the greater the returns.

This is the single most important lesson for investors and enables investments to grow exponentially over time.

But let’s look at this a different way….

If, after ten years, Siya changed jobs, he would have four options on what to do with the money he saved in his retirement fund:

  1. Elect to be a paid-up member in the current fund, or
  2. Transfer it to his new employer’s retirement fund,
  3. Transfer it to a retirement annuity or preservation fund in his own name
  4. Have the money paid out to him.

Most people choose option four and have the money paid out. Like Siya, they ask for the value of the fund. In Siya’s case, it is R100,000. He may compare that to the potential R3,100,000 that he could have had after 40 years and think that R100,000 is worth nothing in comparison to the potential end value.

He may think that if he takes the R100,000 after the first ten-year period it won’t make much difference, as he plans to carry on saving R500 per month for the next few decades.

However, Siya is missing an important point. He will in fact not continue saving at the same rate the next few decades as he has to repeat the first ten-year period. This means that he is not cutting the first ten years of compounding off his money, he will be cutting off the last ten years. In those last ten years the value of his money grows from R1,100,000 to over R3,100,000.

This is a difference of R2,000,000. By spending the R100,000 after ten years, he is fact not losing R100,000 – he is losing the R2,000,000’s worth of growth that he could have had.

The lesson from this is example is that if you change jobs, do what you can to preserve your retirement savings.

Sourced information from article published by Citadel

You have retired – WHAT HAPPENS NOW?

Retiring after devoting yourself to decades of demanding work can be both an exciting and daunting phase in your life. Here are a few things that may change when you are no longer working:

Budget, budget, budget – Instead of HAVING to do stuff you now have more free time to do things you really WANT to do – these may include hobbies, lunches, renovations and possibly holidays. So be realistic with your budget, plan carefully, so that your pension income does not fade away.

The truth about health expenses and underestimating life expectancy – Plan for longevity, as the reality is that people are starting to live well into their 80s. You need a well-set plan to cover medical aid or have enough saved up for medical care. This will bring you peace of mind on your road to a long and happy retirement.

Panic over existing investments – The Market will always rise and unfortunately fall. Avoid panic over your investments by speaking to your financial advisor on a regular basis, so that you understand the facts and know you are safe and that your investments are growing.

Beat the Boredom – Keep your retirement a positive and exciting experience. Create a routine and include activities which explore your passions. Become involved in your community and participate in charities. Elderly have a wealth of wisdom and life experience to impart, don’t underestimate yourself and your talents. Remember watching television can be part of your routine, but should by no means ever become the key focus of your day.

Finally enjoy the time to do things you have always wanted to do and Mondays may just become your favourite day of the week!

Sourced from:



Are you a Common-law spouse?

In a Nutshell…

TIP: Draw up a Will and nominate your partner in your pension fund using the nomination of beneficiary form, should you want any assets to be left to your partner in case of your death.

IF YOU SPLIT UP: A domestic partner, in the event of ending their common-law relationship, will not be entitled to their partner’s pension interest.

In South Africa no matter how long a couple may live together, the law does not recognise common-law marriages as being valid. Their cohabitation (living together) does not create any automatic legal rights and duties between them. The rights of a common-law spouse are not equal to a spouse registered in a legitimate marriage. In terms of the law of intestate succession, if there is no will and one partner in a common-law marriage dies, the common-law spouse will have no rights on the property or assets left behind. Therefore it is important to get a will drafted to make provision for your partner.

Although common-law marriages do not have the same rights as partners in a marriage or civil union, there is some legislation that does consider living together and marriage on equal levels. Please do your homework.

Regarding pension funds, cohabitation is recognized and a common-law spouse may receive pension fund benefits if nominated by the member as a partner. A common-law spouse who qualifies under the definition of a dependant within the rules of that fund, may also receive pension benefits.

The technical definition: – A common-law spouse is a partner in a recognized marriage without being formally recorded with a state or a religious registry, but rather by habit and repute.

Why set up a Will and why details really do matter!

If you die today, have you taken care of what you leave behind? A Will allows for you to make decisions in case the worst happens and while alive you hold the power to decide who will take care of your children, and what property and money goes to whom. Without this document, the government holds the power to make these personal decisions on your behalf.

Here are essential tips in drawing up a good Will:

  • Keep it simple and practical.
  • Update your records – Make sure your employer and retirement fund have your updated list of beneficiaries (CRF members only) as well as a list of those who depend on you.
  • Get expert advice – Use a financial advisor as it is not wise to draw up your own Will unless you are an expert in this field. Understand that getting a will drawn up will require money, however in the long term it is an investment for your loved ones.
  • The cost of getting a Will drawn up need not be expensive – but is always worth it! The cost may vary according to who is appointed as your executor. If unsure ask your Financial Advisor or Banking Institution.
  • Understand the consequences within your Will. We all know families who are going through strife after a loved one dies where the Will created contention.
  • Appoint an executor in your Will. The executor will own the responsibility of taking control of all assets, liabilities, as well as distributing assets according to your Will. Otherwise your loved ones are left having to do this while they are grieving. The process in some cases can take years.
  • Nominate a trusted guardian should you have any children of your own and consider creating a trust for them so that their money can be managed by a neutral party who cannot be manipulated.
  • Check what the term of your marriage contract dictates and make sure you understand what tax needs to be paid.
  • Take care of your obligations, such as maintenance in a divorce order.
  • And lastly, watch your language! There is a world of difference in stating, “I leave my Audi to my daughter” compared to “I leave an Audi to my daughter”.

Planning for your own loss is not the top of everyone’s bucket list; however it will be one of the most important documents you will ever sign and in doing so will create financial peace of mind for your loved ones you leave behind.