STRATEGIES
Retirement Strategies
Retiring wealthy and secure
BY REBECCA DURAND
A
ccording to conventional wisdom, retiring at
age 65 after a period of investing is the way
to go. However, this has increasingly become
difficult as and no longer effective as, on average, only
5% of South Africans invest successfully enough to
retire comfortably.
The increase in life expectancy means that
people are now living longer, but not altering their
retirement plans to account for this.
Traditional Means of Retirement Planning
The traditional method of saving for retirement
involves a company pension fund, which the
company may or may not contribute to on your
behalf. Roughly 7.5% from your side and another
7.5% from the company are contributed to this fund.
Often though, at some stage in a person’s career,
they will move from one job to another and have
the pension paid out to them and in turn spent on
other things. The result being that they have to start
all over again with their retirement savings. A delay
in just five years in saving for retirement can have a
massive impact later on in life.
Often people struggle with traditional methods
of retirement savings as so much based off on active
income, which is generated by a regular hours job.
Active income is generating income based on person
being physically involved in earning money, which is
often limited to the amount of hours and amount of
work available.
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Residential Handbook 2015
Too few people include passive income in
retirement strategies, which is often why it proves to
be insufficient. Passive income is generated month by
month, without the person’s direct involvement, such
rent earned from property. There has been a strong
trend towards creating passive income through their
investment strategies, so that they no longer have to
rely on their active income to earn a living. Finding
an alternative to traditional savings through passive
income is vital when planning a retirement strategy.
Property as an Investment
The last few years have seen more people in South
Africa turning to property as an investment option.
Popular investment options include buying a house
to live in, to rent out for extra income, to hold as
retirement security, a holiday home or just a quick
way to make money.
The most important decision is whether you want
to be an investor or speculator. A speculator buys
property with the intention of selling and making a
profit as soon as possible, while an investor sees the
property as a long-term investment of at least three
to five years. A large profit can be made through
selling quickly, but the real money lies in allowing
an investment to mature to its full potential. The
South African middle class is increasing by 500 000
per annum, creating a large market for investment.
The rising aspirations of the middle class means that
many of them want to live in propert Y\