by Colin Horwitz
My career in the Insurance Industry now spans 35 years and in this time it has been my privilege and honour to talk to many people from vastly different walks of life with varying different requirements and to become involved in their lives not only as a financial planner but as a friend, confidant and trusted partner in their financial affairs. Things have changed drastically during my career and to my mind some things have surfaced that should be emphasized.
- Ageism (for want of better word): It is no secret that people are living longer thanks to lifestyle changes and medical advancement. I have a couple of clients that are in their early 90’s and still play a couple of rounds of golf per week. Four weeks ago, I met a gentleman who was enjoying a cup of coffee at a pavement café in Melbourne. He was wearing lycra and his bicycle was parked next to him against the railing. As a keen cyclist myself, it was natural to start a conversation with him. He told me that he had only been cycling for about 54 years and that he cycled a daily 30km route with a coffee break on the way. I remarked that this was long cycling history. Yes, he said. But I only started at 34 years old. I was flabbergasted…… The gent was 88 years old. This made me quite optimistic about my future.
What hasn’t changed is the retirement age in many businesses and the implication for this is that your retirement savings will have to last a long time.
To this extent, proper retirement planning must take place if a comfortable retirement is what one aspires to. Now, if we knew the exact date on which we are going to die, we could calculate with a certain degree of accuracy, how much money is needed at retirement age. Unfortunately, this is not the case and we at Morebo calculate retirement needs on a basis that the return on investment is what one lives off. There are 3 elements here and they are the return on your investment, the rate of “your” inflation (definitely not 4%) and the amount that you draw. A balance must be struck to enable one to live comfortably whilst allowing for an increase in the cost of living – and this must come from the income that the investment generates.
2. Medical Expenses: It’s no secret that as one ages, medical costs increase. As we all know, medical inflation is a lot higher than normal inflation. Many people, to their detriment, don’t factor this into their retirement plans. In my view, a capital amount must be calculated using different criteria and this amount should be planned for over and above your normal retirement needs.
3. Capital Expenditure: What will your capital needs be? Do you have to replace a car, do an alteration, want annual holidays? All this must be taken into consideration in the retirement planning process.
- Coming Home to Roost: This is an extremely difficult one but is something that is now happening often.
Due to the economic situation that we in South Africa are experiencing, more and more people are losing their jobs and new ones are not easy to come by. Many of my clients are finding themselves in the position where a child and sometimes a family must move back into the parental home as they find themselves part of the unemployment statistics. The strain of this on retirement income cannot be exaggerated and I must admit that I don’t know how to factor this into a retirement plan. My only advice here is to ensure that one has a “Rainy Day Savings” account, separate from your retirement investments, that can be tapped into should the need arise for any unplanned eventuality.
I am often asked as to how much a person must save towards retirement. There are too many variables that must be factored into the equation to give an emphatic answer. A professional Financial Planner will have the knowledge, tools and ability to help with this calculation. We at Morebo certainly do have all these available and we are only a telephone call away.
In closing I would like to refer you to an article entitled “How to get a good return in one day” that appeared in our Newsletter at the end of January. If you missed it or deleted the newsletter (by mistake) you will find it on our website www.morebo.co.za