Six themes to tackle when spring cleaning your retirement funds:

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28 September 2021
Do you know all the fees and costs that you are paying towards your retirement funds?

Your EAC

Do you know all the fees and costs that you are paying towards your retirement funds? Costs have a huge impact on investment outcomes over time. Poor management of fees can literally cost you a ton of money over time.

The Effective Annual Cost (EAC) allows one to compare the charges across different investment providers in order to assist investors in making an informed decision. Ask for your EAC from your various retirement fund providers and know how much you are paying. For more about the EAC click here.

Your Investment funds

Do some homework and understand the investment fund (e.g. a unit trust) in which your money is invested within your retirement fund. Have a look at the asset allocation, the fund objective, performance history and risks involved. These investment funds drive your outcomes, they are the heart of your retirement fund and will ultimately determine your investment success or failure over time.

Vested and Non-vested Rights

Do you understand how your retirement fund works and when you will be able to access cash and how much? Understanding vested and non-vested rights is important from the get go so that you ensure that when you reach retirement you know just how much you can take in cash, how much tax you pay and how much you need to invest to help generate an income for the remainder of your life.

Don’t assume you can access your entire fund at retirement rather seek clarity now to avoid any nasty surprises later.

Regulation

Check if your retirement fund is well regulated and what laws are in place governing retirement funds. One such law is the Pension Funds Act that sets out all the do’s and do not’s for your protection.

Tax Efficiency

Are you taking full advantage of tax concessions by contributing to your retirement funds? Find out how much you can contribute in a tax year (1 Mar to 28 Feb) to maximize your tax planning. You can even get money back to help pay for a well-deserved holiday sometime.

Contributions and Escalations

Are you contributing enough to your retirement fund to be able to provide you with a capital amount sufficient to take care of you in your retirement years? Gather some projections and estimates to understand just how much you can expect at retirement based on your contributions to your retirement fund. Also ensure that you increase (escalate) your retirement fund contributions annually to keep up with inflation.   

NB - If you only contribute a small percentage of your income to a retirement fund then you should also expect a small amount at retirement. Having a retirement fund in place does not necessarily mean your retirement is sorted, the amount you contribute and the investment fund chosen are key drivers of retirement success!

No matter what retirement funds you hold – give them a spring clean!

Get into the nitty gritty and make sensible fresh changes to ensure you are maximizing your retirement funds. After all you are ultimately responsible for your retirement plans and only have one chance to get it right. The earlier you start the better.

 

 

Gareth van Deventer CFP®
OUTvest is an authorised FSP. All our investments are exposed to risk, not guaranteed and dependent on the performance of the underlying assets. Ts and Cs apply.
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