This is default featured slide 1 title
This is default featured slide 2 title
This is default featured slide 3 title
This is default featured slide 4 title
This is default featured slide 5 title
 

Category Archives: Finance

Tips to Save Their Kid’s School Fees for Parent

Here are some tips below for parents to ensure that they have planned appropriately for their children’s education costs:

Start early

Parents should start saving for their children’s education as soon as they possibly can. Many people do not consider, or are not aware of, the great advantages of compound interest, and how accumulated savings grow over several years when invested properly. By investing from an early age, parents will eliminate the financial worry of not having sufficient funds to give their children the best education possible, as the funds in their investment will grow every year.

Automate savings

The best way for parents to ensure they are regularly contributing towards their children’s education is to open a dedicated savings account and set up a monthly debit order. This way the parents will automatically save money every month towards this cause. However, they must have a strict rule in place to never withdraw any money from this account if it is not related to the child’s education.

Explore ways to get discounts

It is advisable to do some research and contact schools to find out whether they offer financial incentives that could result in long-term savings. Many schools offer a discount if the fees are paid as a once-off amount in advance. Some also offer a reduction when there is more than one child attending the school. These types of savings can make a big difference over an 18-year period.

Include education funding in the financial plan

It is important that parents include education funding in their overall financial plan. These expenses have to be accounted for as part of the monthly household expenses to determine how it will affect the family’s overall financial position. When it comes to developing financial plans, it is usually a good idea to consult a reputable financial planner who will be able to develop a solution for the client to ensure that they have provided sufficiently for their children’s tuition fees and related education expenses.

With the cost of education increasing every year, parents are faced with increased expenses for the privilege of sending their children to school. School fees are a big financial commitment, but with the right advice, families do not have to see this expense as a financial burden.

Increase Your Wealth with One Way

What is human capital?

Human capital is the combination of skills, knowledge and abilities you have that will enable you to generate income over your working life. Nearly all of us have an ability to generate some income but very few people consistently invest in themselves so that they can increase their earning potential over time. According to the Federal Reserve of San Francisco, university graduates generate R16 million more income over their careers than non-graduates. This might give some context to the #feesmustfall campaign in South Africa.

If you choose to invest in yourself, you need to ensure that your skills and knowledge remain relevant and adaptable to changing economic conditions and an evolving business environment. You should regularly review whether you need to add to your skills or knowledge-base. Additionally, you need to be honest enough with yourself to be able to decide if you need to change careers if you are in a dead-end street. For instance, I would not consider newspaper printing as a long-term career option!

Specialise but not too much

Some careers reward those who specialise but one should always be careful of becoming too narrowly focused in your career. For example, deciding on an academic career researching the mating habits of albino penguins in the Southern Cape might not ensure a long-term income. However there might be less risk in being the orthopaedic surgeon who specialises in surgery of the shoulder in South Africa. Many young people strive to be a manager in a large corporate. This might be the most risky career choice one can make. Managers are essentially generalists and are often the first people to be fired in a merger or downsizing. If you plan to work in a corporate, you might do better focusing on being a revenue generator or product specialist.

Not only for academics

If you are not academically inclined or you have no interest in tech, you could always consider specialising in old world industries. There is a massive shortage of plumbers, electricians and general handymen. Now that more people work in services industries, there are many fewer people who can work with their hands. This provides an ideal opportunity for reskilling yourself if you have the inclination.

In the age of mass production and “mass specialisation” provided by the internet of things, it should not be surprising that there is a major shortage of people who can build or create objects with their hands. I believe craftsmen who can make handmade items such as furniture or master builders are in big demand. It does not surprise me that craft beer, artisanal baking and coffee are becoming major industries. More people are becoming interested in where their food and drinks are made and this includes where the ingredients are sourced. This is the type of trend that is likely to suit those with old world skills and when skills are limited and demand is increasing, your earning ability increases rapidly.

It does not matter what you do today, you need to be conscious of how you can grow yourself and possibly change course when required. Viewing yourself as an income generating asset that requires work and maintenance is probably your best investment. Charlie Munger said of his business partner: “Warren Buffett has become one hell of a lot better an investor since the day I met him, and so have I. If we had been frozen at any given stage, with the knowledge we had, the record would have been much worse than it is. So the game is to keep learning, and I don’t think people are going to keep learning who don’t like the learning process.”

Tips for Women’s Finance

You need your own will and have to understand the implications of your partner’s estate planning

Chairperson Ronel Williams, says in practice, Fisa often finds that where a woman does not have a lot of assets, or leads a busy life, proper estate planning is neglected.

This could have far-reaching consequences.

Where estate planning is done, it is important to not only consider current circumstances, but to plan for the future, should the situation change, she says.

One example is in cases where a woman’s husband passes away, leaves the bulk of the estate to her and she dies shortly thereafter.

“So then suddenly she does end up with having quite a sizeable estate and her will actually doesn’t reflect the position for her changed financial circumstances.”

She could for example have provided in her will that her estate devolves on her children. If they are still minors (under 18 years) and inherit small amounts, this does not necessarily pose a problem. If, however, her estate is sizeable, the children’s inheritances have to be paid to the Guardian’s Fund unless her will provides for a trust.

While the law allows parties to have a joint will, Fisa usually advises against it, Williams says, mainly for practical reasons. There have been isolated instances where the surviving spouse dies and the Master’s Office battles to trace the original will that also applies to the surviving spouse.

Men and women living together are not automatically treated as ‘married’ under the law in case of intestacy

The Intestate Succession Act applies to every South African who dies without a will and stipulates that the estate should be divided according to a specific formula. If the person was involved in a relationship other than marriage, the type of relationship will determine whether the partner will be allowed to inherit.

Williams says in terms of the Act partners need to be regarded as a “spouse” in order to inherit in the case of intestacy, but the term is not defined in the Act. As a result, other legislation and court cases have to be consulted for an explanation.

Historically, a marriage entered into in terms of the Marriage Act was the only recognised spousal relationship, but with the introduction of the Constitution, the legal system acknowledged that people in other types of relationships were entitled to protection.

Williams says as a start, legislation was passed in the form of the Customary Law of Succession Act and parties to traditional marriages under black customary law are now regarded as spouses when dealing with an intestate estate.

Court cases have also extended the definition of a spouse in this context to include monogamous Muslim and Hindu marriages and polygamous Muslim marriages.

In terms of a Constitutional court ruling, same-sex partners are also regarded as spouses for purposes of intestate succession.

While men and women who live together without getting married often assume that the law treats them as married, this is not necessarily the case.

“Partners in such relationships do not automatically qualify for spousal benefits.”

In terms of a Constitutional court ruling, such partners cannot be regarded as spouses for purposes of intestate succession.

Contradictions

Because the Marriage Act regards marriage as a union between one man and one woman, and same sex couples do not fit the criteria, they were previously not regarded as spouses (before the introduction of the Civil Union Act).

Williams says the Civil Union Act, that came into effect on November 30 2006, allows parties to enter into a civil union, which gives them the same rights as a married couple in terms of the Marriage Act. The Civil Union Act applies to homosexual and heterosexual couples.

“If a same sex couple or heterosexual couple enter into a civil union under the Civil Union Act, they are regarded as married for purposes of the law and they will then also be regarded as a spouse,” she says.

Williams says the current position – the result of a court ruling – is that where a same sex couple live together but have not entered into a civil union in terms of the Civil Union Act, they can inherit from each other when one of the parties dies without a will.

At the time of the court case, the Civil Union Act was not in operation yet, and the court argued that because the parties were not allowed to enter into any type of union to formalise their relationship, they were entitled to protection.

“So it was purely because they didn’t have the option to marry, that the court felt our laws had to protect them.”

But since the Civil Union Act is now in force, should same sex parties still be regarded as spouses if they have the option to enter into a civil union, but choose not to do so?

Williams says because this was a Constitutional Court ruling, the ruling stands.

“So at the moment, if you have same sex parties who did not enter into a civil union and one party dies without having made a will, this court ruling will actually apply and it means they will be regarded as spouses and they will still be protected.”

This is a contentious position, as heterosexual parties who live together but do not enter into a civil union cannot inherit if one party passes away without a will. Since these parties had the option to get married but chose not to do so, the legal position is that they do not need protection.

The introduction of the Civil Union Act puts heterosexual and homosexual groups on equal footing, but because of the Constitutional Court judgment the groups are treated differently for purposes of intestate succession.

“It is one of those matters where we are all waiting for some Constitutional challenge but it just hasn’t happened yet.”

Williams says it is important for heterosexual partners to know the fact that they are living together does not give them protection under the laws of intestate succession.

“Unless they enter into a civil union or get married, they cannot inherit from each other when the other one dies without a will.”

Williams says it is therefore crucial for a woman in such a relationship to ensure she and her partner draft wills to protect one another.

Tips to Teaching Your Children about Money

However, a panel of experts at The 2016 Money Expo agreed that this is one of the most important subjects any parent has to manage. Preparing your children for their financial futures is one of the greatest gifts you can give them.

Nikki Taylor from Taylored Financial Solutions said that the earlier parents start on this journey, the easier and more effective the lessons will be.

“For me, it’s about starting them early,” said Taylor. “How do you teach children manners? You don’t wait until they are 15. You start when they are really young.”

Brand manager at Emperor Asset Management, Lungile Msibi, said that even two- and three-year olds can appreciate the lessons of delayed gratification and working towards a goal.

“Start kids when they are young with goal-based savings,” she advised. “If they want a Barbie doll, for instance, show how they can save towards that goal. That’s important because later in life they will understand that you can’t invest if you don’t have a goal.”

As they grow older, you will have therefore prepared them for conversations about investing for the long term. It’s particularly helpful if family members support you.

“When my kids were born I gave their grandparents bank account details for both of them and said instead of filling my house with toys at birthdays and Christmas, please put money in these bank accounts,” said Taylor. “My children still get toys and presents, but they also see the money in their accounts and how it is earning interest. They now get excited at every birthday and Christmas to see who has put money in for them and how much they now have.”

It’s also important to involve your children in how you are saving for their own futures through things like education plans or unit trusts that they will receive later in life.

“I’m saving for different stages of my son’s life and he knows what each of those investments are and what they are for,” said Dineo Tsamela, founder of The Piggie Banker. “He gets excited because he can see what that money means for him – that he will have access to a really great education and that he will have some financial security. He appreciates that money is not just about what it can get you now.”

Msibi said that it’s also important to teach children the impact of the choices they make. She used the example of a child who wanted a new iPhone, but his parents offered him the choice of having them invest that money instead.

“The value of an iPhone in one year or two years diminishes,” said Msibi. “But if your child rather invested that R10 000, it could make a huge financial difference later in life if you give it 40 or 50 years to grow.”

It is also crucial that parents instil a sense of where money comes from.

“You have to teach them the value of work,” said Tsamela. “It’s very important for children to understand that money doesn’t just happen – that there are things you have to do for it to come in.”

Taylor agreed.

“If my kids want anything we negotiate how many stars it will cost, and I then allocate them stars for things like good manners or cleaning a room,” she said. “They ask me why they have to get stars when their friends get things for free, and I explain that mommy has to work for everything she earns, and that’s an important conversation. Because it becomes something they have to work towards, they also have to consider whether it’s worth it or whether there is something else they want more instead.”

Crucially, this is also linked to the values we teach our children. And those values are most often conveyed in how we ourselves treat money.

“What value system do you instil in your children through the way you spend your money?” asked Kristia van Heerden, CEO of Just One Lap. “We should think about how we interact with money and what money can do for us.”

Tsamela added that parents have to think about the lessons they are teaching through how they talk about what money is and why it is important.

“Putting the emphasis on saying that you have to be rich, you have to have money distorts children’s view of how the world works,” she said. “Don’t make money the primary thing. What is primary is fulfilment and that you enjoy your life. Everything else comes afterwards.”

Importantly, parents should consider carefully what they teach their children about what it means to be successful.

“Parents need to teach their children about purpose, resilience, following their dreams and pursuing them relentlessly,” said Nonqaba Stamper from FundBabies. “If they help their children to become the best version of themselves, that is when they contribute to society and make South Africa a better place. When they see themselves as people who can add value, that’s where true success lies.”

Financial Education Delivered

Six months after launching, the highly popular Wealthy Ever After financial education course is moving into the corporate market, having delivered 9 000 hours of content to users.

Co-developed by JSE-listed media group Moneyweb and The Money School,Wealthy Ever After is an online financial education course aimed at empowering people to take control of their finances. Used in conjunction with webinars and on-site education sessions, it forms a part of a powerful education tool.

“This course represents a major investment for Moneyweb and it is pleasing to see the take-up of the product by both individuals and corporates,” says Moneyweb Managing Director Marc Ashton. He adds: “Lack of financial education leads to poor money habits and this has a proven negative impact on productivity inside businesses and a direct impact on the bottom line.”

The challenging economic conditions add an extra layer of challenges into the mix, as staff grapple with rising interest rates, a higher cost of living and lower expected investment returns from property and equities.

“As employers begin to see the effects of the macroeconomic conditions filtering down into both the personal and professional lives of their employees, we’re seeing almost daily requests for training and assistance from corporates,” says Money School co-founder Hayley Parry.

“We’ve definitely seen an increase in enquiries within the past two months – including from companies that know that they’re not going to be able to provide employees with increases, or whose employees will be facing retrenchment within the next six months to a year.”

While the tough economy means that many businesses will be tightening their belts, financial education has a proven direct impact on the workforce and should not be ignored.

According to the 2015 PwC Employee Financial Wellness Survey:

  • 35% of ‘Generation Y’ employees find it difficult to meet household expenses on time each month
  • 30% find it difficult to make their minimum payments on their credit cards
  • Less than half (43%) are confident they will be able to retire when they want to

Gary Kayle, Money School co-founder says: “As money coaches, we know that there are many external factors which employers and employees cannot control when it comes to money. But what they can do – is help employees translate their hard work and effort into debt elimination and wealth building activities. That is something that is within their control and there has never been a better time for employers to showcase that they care about their staff’s financial wellbeing.

“You only have to see the testimonials and feedback we receive to understand the massively empowering impact that this has on staff morale and productivity.”

5 Innovative Finance Products Launched

SmartRand

Developed by financial planning firm Galileo Capital, SmartRand is one of South Africa’s first ‘robo-advisers’. The online service gives anyone, with any amount of money to invest, access to advice and the ability to invest securely through its platform.

SmartRand takes users through a detailed questionnaire that assesses their risk profile and their investment goals before recommending a suitable product for their needs. It currently uses a selection of just five passive fund choices to keep things simple and the costs low.

Just Retirement

With the reform of the pension fund industry a government priority, Just Retirement’s ‘enhanced annuities’ offer potential benefits to anyone with a below average life expectancy. Since the likes of smokers or those with medical conditions have different risk profiles, enhanced annuities can potentially increase their retirement income.

Based on a telephonic questionnaire, Just Retirement assesses an individual’s risk profile and offers them an annuity rate based on that risk. It therefore moves away from the one-size-fits-all approach that is currently the norm.

RMB Krugerrand Custodial Certificates

A first in the world, Krugerrand Custodial Certificates give investors to own Krugerrands while enjoying the liquidity of an exchange. The certificates offer a low cost way to invest and store gold, with the option for investors to take delivery of the physical product if they prefer.

Investment Solutions stokvel funds

Members of stokvels in South Africa currently put between R45 and R50 billion into these organisations every year. However, the systems employed by most financial services companies simply don’t recognise these structures or provide ways for them to use formal savings methods.

Investment Solutions has therefore designed a targeted product offering that recognises stokvels as entities and provides special application forms for their FICA registration. This gives stokvels the opportunity to invest in unit trust-type funds to earn better returns for their members.

Absa Stockbrokers ETF only account

As passive products grow in popularity in South Africa, financial services providers are increasingly looking at ways to make investing in them easier and cheaper. The ETF only account from Absa Stockbrokers does exactly this.

For a brokerage fee of 0.20% per trade and a minimum fee of R20, the platform allows South Africans to invest in any locally-listed ETF at a reduced fee. Particularly for large lump sum investments, this is a very competitive rate.

Advice for a young investor

I am truly sorry to hear of the loss of your father. Taking responsibility for the family’s finances at 22 is no small task. I trust that over time, the pressure of managing your family’s financial matters and completing your studies holds you in good stead in the future.

As you embark on this new journey in the investment world, I want to stress the importance of staying anchored in your financial goals and the investment strategy you choose to use in order to achieve them. If you do not believe in your investment philosophy, your prospects for success diminish and you are at the mercy of emotion.

You should also remain mindful of the following principles: risk and return are related, diversification is the antidote to uncertainty, asset allocation determines the rate of return in a diversified portfolio, and emotion undermines the best investment strategy.

I will address your question pertaining to your investment strategy but I am unable to offer further guidance as I have limited information as to the capital invested as well as your monthly income needs and future goals. You will also need to talk to a professional with regards to the potential tax implications of your decisions.

The main purpose of the MSCI World Index ETF is to track the MSCI World Index. The fund follows a buy and hold strategy, commonly known as passive investing, which results in lower management costs compared to most actively managed funds.

Tracker funds typically offer long term capital growth. If you want to achieve maximum capital growth over the long term, however, re-investing dividends is essential in order to maximise the compounding effect.

That said, there are a number of reasons why I agree on the approach you have described as the launch pad for your investments:

  • By choosing to invest directly offshore via tax clearance, you avoid annual asset swap fees charged when investing in South African-registered foreign investments.
  • At a later stage, being invested directly offshore will give you access to a much wider range of investment options, should you wish to diversify your portfolio.
  • Another advantage of being directly invested offshore is that you will be disinclined to cash in your investment should the need arise.
  • Your choice of an ETF is both simple and very cost-effective. Vanguard in particular is considered to be the leader of index tracking investment options worldwide.
  • You automatically achieve a very wide level of diversification within the asset class you have chosen, which in this case is global equities. The ETF you have selected contains over 1 700 underlying shares spread across the globe.

However, given that you mention that you wish to use the dividends for monthly expenses, you do need to consider that

  • The investment you have chosen is not designed to maximise dividends. If income is therefore your primary goal, this may not be the most effective way of achieving that.
  • The Vanguard MSCI World ETF also does not pay out dividends every month. Distributions are only made quarterly. On top of this it is administratively clumsy and expensive to repatriate dividends every few months to South Africa.
  • Withdrawing dividends is also potentially in conflict with the long term nature of the investment. The reinvestment and compounding effect of the dividends within the investment are important factors in achieving a healthy positive real return over time.
  • Index investments can never take advantage of specific opportunities that present themselves. The return of the investment will always be similar to the index.
  • While the employment of an index-based investment may form part of an overall investment strategy, it should not comprise the sum total of your strategy. Once your portfolio has achieved a certain level of growth, you should diversify into various growth asset classes and sub-classes such as equities in emerging markets, property, bonds and possibly even hedge funds. Within such a strategy, you should employ both passive (index) strategies as well as active strategies in order to achieve maximum returns.

Time for Clear Heads

These difficulties aren’t limited to South Africa either. Global economic growth is still tepid and geopolitical tension is high.

“It’s very much at the top of everyone’s mind that there are very high levels of uncertainty both on the political and macro economic fronts,” says the manager of the PSG Equity Fund, Shaun le Roux. “As far as politics is concerned we have what’s going on inside the ANC, a very divisive US election, and Brexit and its consequences. On the macro economic side, there are big questions around the South African economy, which is going through a very tough patch and may be looking at a recession.”

Of these, the local political landscape is perhaps the most concerning. However Le Roux says that while the stakes are high and the outcomes unpredictable, investors shouldn’t make hasty decisions based on noise alone.

“What one needs to bear in mind is that when a story is dominating all the newspaper headlines the market knows about it and the market tends to be quite efficient at pricing in bad news,” he argues. “In this regard our analysis shows that something like a sovereign debt downgrade is pretty much priced in by the market already.”

Although there could still be a crisis caused by a successful attack on the integrity of treasury and the Reserve Bank, this is not PSG’s base case. Nevertheless it’s important to be diversified to be protected against even the worst possible scenario.

“The main pint that we try to make to clients is that when the world is this uncertain and the range of outcomes is this wide, we think you gain very little by trying to forecast exactly what is going to happen,” Le Roux says. “Brexit is the best example of how futile this can be. What we are rather focusing on is trying to make decisions that give our clients the best chance of achieving their objectives.”

This requires taking a long-term view and seeing opportunities beyond the market noise.

“When there are this much uncertainty and fear, we typically find that the market will give you some good opportunities,” says Le Roux. “But you need to be able to take a long-term view backed up by a long-term process. We are prepared to be patient, but we also can’t dismiss the risks out of hand. We just have to make sure that our clients are adequately protected.”

This means ensuring that they aren’t exposed to assets that could incur permanent capital losses. At the moment, Le Roux believes that there is a very real risk of this in certain assets.

“The anomaly is that even though there is all of this uncertainty and fear, at the same time there is a backstop to global financial markets in the form of ridiculously low developed market bond yields,” Le Roux says. “A consequence of this is that asset classes that are deemed to be related to bonds, specifically the highest quality equities are trading at very elevated valuation levels. We would argue that ownership of inflated assets poses the biggest risk to future performance for investors.”

At the same time, there are other parts of the market where the uncertainty has given rise to attractive asset prices.

“This includes domestically-focused business in South Africa such as banks, where the tough economic conditions and the recent spike in bond yields have had a dramatic impact on share prices,” Le Roux says. “In the last six to nine months we have been buyers of financial stocks and have also been adding South African bonds to our multi-asset portfolios.

“It’s important to note that we hadn’t been invested in South African bonds for a number of years before this,” he adds. “ It’s only in recent times that we think we can buy them at a margin of safety and at levels that lock in attractive real yields on a long-term view.”

Ultimately, he argues that the only safe way to negotiate times like these that are so uncertain is to focus on the fundamentals as much as possible.

Risk And Opportunity

 The threat of a downgrade has been hanging over the market for nearly a year, ever since S&P put South Africa on negative watch in December 2015. With the country’s sovereign rating only one notch above sub-investment grade, the next step down would be into ‘junk status’.

This has worried many investors, as the obvious question is what they should be doing with their portfolios. How do they manage the risk of a potential downgrade?

For Ian Scott, the head of fixed income at PSG Asset Management, however, this question should always be asked alongside another: what if South Africa isn’t downgraded? The outcome, he argues, is not guaranteed and therefore investors should be seeing not only the risk, but also the opportunity.

“What’s important to think about is that the downgrade is already reflected in South African bond pricing,” says Scott. “The country’s offshore credit spreads are trading in line with other countries that are already in junk status like Brazil, Russia and Turkey. Nobody knows what the market will do if we are downgraded, and there will probably be a knee-jerk reaction, but a lot of that negative news is already reflected.”

This means that the risks, and therefore the opportunities, may not be the obvious ones.

“The important thing is that a downgrade doesn’t mean a default,” Scott says. “South Africa’s debt metrics by global standards are not that onerous. Our debt-to-GDP ratio is only around 50%, and only 9% to 10% of our debt is offshore. If you look at our peer group, their numbers are way above that.”

He argues that an objective assessment of the country’s fundamentals suggests that there is a low probability that South Africa will default on its debt.

“If you can put the political noise to one side, for our peer group we are still in a good fundamental space,” Scott says. “The possibility that South Africa will not pay its debt is very low. So if you think that we have high yields, a strong capital market, and good banking system, that’s not a bad environment.”

He believes that foreign investors are seeing this opportunity more than locals.

“If this was a country where foreigners felt that they couldn’t be sure of getting their money back, why would they be coming into our market?” Scott asks. “When government recently placed $3 billion in offshore bonds, the placement was three times over-subscribed.

“That doesn’t indicate that foreigners feel that they won’t get their money back over the next ten years,” he says. “Yes, fears around the political situation do make it a much more cloudy situation, but within that is probably where the opportunity lies. We don’t know what will happen, but if you sit in assets that already reflect that negative pricing we think that’s an opportunity.”

Scott therefore warns investors against premising all their decisions on a single outcome. Building a portfolio that assumes that a downgrade is a certainty places you at significant risk.

“There is a big binary danger in having only one view in your portfolio because if that doesn’t materialise it could have a very negative effect if the opposite actually happens,” he says. “You don’t want to take one way directional bets. In the volatile world we live in, that is quite a dangerous thing to do. Diversification in a portfolio is prudent.”

This does mean taking a more nuanced view of risk. The downgrade isn’t the only risk out there, and it may not even be the biggest one.

“Is it that risky to buy government bonds when a downgrade is already reflected in the prices?” Scott asks. “At PSG, we think that when bond yields are low, that’s when you have the biggest risk. When yields are high and there is a lot of fear and uncertainty in the market that is when we see opportunities.”

He points out that last December at the time of Nenegate, ten year government bond yields spiked above 10%. This was a time of great fear in the market. However, PSG saw that as a buying opportunity because a large amount of uncertainty was being priced in.

what you’ll do after retirement?

 However, more and more people are having to ask what happens next. In a time when life expectancy is steadily increasing, the idea of throwing away your briefcase and putting your feet up to live out your ‘golden years’ in peace and quiet is looking increasingly less appealing, and less practical.

For a start, there is little point in retiring ‘to do nothing’. Many retirees find that they are actually busier than they were during the working lives, but the difference is that they can do what they enjoy.

“We are finding more and more people who are re-thinking retirement,” says Kirsty Scully from CoreWealth Managers. “In most cases, they have been professionals in their careers and they want to stay employed to continue with their personal and professional growth and development, yet they don’t want a typical work schedule. They are looking for flexible working arrangements so as to have a good balance between work and leisure.”

Wouter Dalhouzie from Verso Wealth says that from both a mental and physical well-being point of view, it is important for retirees to keep themselves occupied.

“I had a client whose health started failing shortly after retirement,” he says. “He started a little side-line business and his health immediately improved. When he retired from doing that, his health went downhill and he passed away within a matter of months.”

Verso Wealth’s Allison Harrison adds that she recently attended a presentation that discussed how important it is for people to remain active. “The speaker explained that if we don’t continue using our faculties, we lose them as part of the normal ageing process,” Harrison says. “The expression she used was ‘use it, or lose it’!”

She relates the story of a retiree who had been in construction his entire working life.

“After a year in retirement, he decided to buy a second home, renovate it and sell it,” Harrison says. “This was very successful, so he decided to repeat the exercise using his primary residence.  This yielded a bigger return than the first one and thereafter then moved from house to house, renovating, selling and moving on.”

This way he ended up making more money in his 20 years of retirement then he did in his 40 year building career.

But what about the money

 Encouraging retirees to stay active for the sake of their health may be fairly uncontentious, but the harsher reality is that many people in retirement have to find something to do for more than just the sake of keeping their minds ticking over.

It is accepted that the vast majority of South Africans will not have saved enough to retire comfortably. Many people will therefore need to look for some kind of work to supplement their incomes.

This problem is only going to grow larger as people live longer and their money therefore has to last longer.

“Because of the way medical technology is developing, we now plan for money to last until our clients are 95,” says Hesta van der Westhuizen, an advisory partner at Citadel. “But the way things are going life expectancy could be 120 for anyone being born today.”

Already many people retiring at 60 still have a 30 year time horizon, and that period is only going to grow longer. Van der Westhuizen argues that this means people need to start thinking about starting an entirely new phase in their lives.

“These days a lot of people reach 60 and say they are going to retire now and do another job, but I think we need to start changing our mindset and think about the possibility of going back to university to get another qualification to do the things that we actually always wanted to do,” she says. “We are going to be so much healthier for so much longer, and we need to think about what that means.”

In other words, we may need to consider starting a whole new career post-retirement, and not just finding another job. This has big financial implications.

“If you get to 60 and you say I am going to get another job, some companies might take you on on a half day basis or as a consultant and you might continue earning income immediately, although perhaps at a lower level,” Van der Westhuizen says. “But if you start a new career, you might go to back to university, and you will have to provide for that.

“My opinion is that in the future, we will have the ability and the health to do a second degree and launch another career and that will have exactly the same financial impact as when you started your first one.”

This means that financial planners may also have to start having new kinds of discussions with their clients.