Page 18 - • waterfall_9_Aug2020_v3.indd
P. 18
Waterfall News
Let’s compare Tshepo and Charles. Both are 45 Tshepo, who planned ahead, has the necessary liquid
years old and, apart from having current employee funds to top up his income. Unfortunately, Charles has no
benefits in their respective jobs, they also have their available funds, but he can make a once-off withdrawal
own preservation fund investments from previous from his preservation fund before he reaches 55. He
employment with a fund value of R1 900 000 each. decides to take R900 000 to help him meet his payments
for the next few months. He takes such a large amount
Tshepo has appointed a financial adviser and because the future feels daunting and uncertain, and
together they have set short-, medium- and long- having used his one allowable withdrawal, he knows
term financial goals. Tshepo made provision for any he can only access his funds at retirement again.
short-term cash flow needs by having an emergency
fund and a short-term voluntary investment. Despite having to pay tax of R179 100 (leaving
him with only R720 900), he withdraws the
Charles decided not to set out clear goals or make funds, leaving much less for when he retires.
short-term provisions and only has his existing
employee benefits and his own preservation Assuming both Tshepo and Charles retire at age 65
fund investment for his retirement. and have an investment return of 9% per annum
(after fees), these are the results of their actions:
In April 2020, their respective employers started
operating within national lockdown regulations and Tshepo Charles
their working hours were reduced significantly. They Preservation fund value at present R1 900 000 R1 900 000
both suffered a pay cut and now need to supplement Less withdrawal benefit taken to cover - (R900 000)
their income to meet financial obligations, such as bond immediate need
repayments, car payments and household expenses, etc. Amount to keep invested for retirement for the R1 900 000 R1 000 000
next 20 years
Preservation fund value at age 65 (in nominal R10 648 380 R5 604 411
terms)
Making a withdrawal from your retirement
fund can make a big dent in your provision
for retirement. You’ll have to work longer,
contribute more, or be content with much
less income at retirement. The better
alternative is to plan and save smartly.
How to avoid a reduced
retirement income
Take the time to set out your financial goals
and work out a plan to reach them. The
earlier you start, the better, although it is
never too late. Make sure you have short-,
medium- and long-term savings that
form part of different savings pools, and
which allow different levels of access.
Should you need to make use of your
short-term, emergency savings funds
along the way, remember to top up your
savings pool again. A qualified financial
adviser can help you work out which
Nothing like your grandad’s Volvo.
product is best, and which is right for you.
The current pandemic has proven how important
it is to have savings to fund your short-term needs A whole new kind of Volvo.
and to prevent the need to loot your retirement
fund when a crisis looms. By structuring your The Volvo XC40 is a spacious, classy, award-winning vehicle built for adventure.
savings and investments with care, and planning
for short-term uncertainty, you can work Book a test drive today.
to prevent one crisis creating another and *Terms and conditions apply.
greater one, when you need to retire one day.
Auto Baltic Midrand Corner New Road and Lever Road, Midrand
011 805 3138 | candice.mckenna@supergrp.com
16 Waterfall Issue 9 2020
48301 (Volvo Car South Africa (Pty) Ltd) - Corporate, 2020 Q2 - Volvo Dealer - Midrand XC40 print.indd 2 2020/06/18 16:36
