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What should she be looking out for? | mapalo | Not supported with pagination yet | |
So, if your parent is retiring, an aunt, an uncle, someone in the community is retiring, this video is for them so that you give them the information and that they make the most efficient decision that will give them a good outcome for their retirement because it's a big, big, big decision when you are going into retir... | mapalo | Not supported with pagination yet | |
So, this information is for them and also for you, even if you are young, like myself, like most people who watch this channel, but to kind of start thinking around retirement and the implications even later on in life. | mapalo | Not supported with pagination yet | |
All right. So, the legal retirement age in South Africa is 55, okay, from 55, but obviously, it depends on the fund rules. | mapalo | Not supported with pagination yet | |
So, perhaps you are part of a pension fund or provident fund who has a retirement age of 65, but legally can retire from the age of 55 in South Africa. | mapalo | Not supported with pagination yet | |
All right. So, let's say you are or your parent is close to retirement, they're retiring in the next couple of months. | mapalo | Not supported with pagination yet | |
What should they be thinking about? | mapalo | Not supported with pagination yet | |
So, I'm going to talk about the technical stuff, but also how they should be thinking around retirement and the expenses once they don't earn an active income anymore. | mapalo | Not supported with pagination yet | |
Okay, so there are two options that a retiree has at retirement. | mapalo | Not supported with pagination yet | |
Okay, so remember you've built up your pension, your provident fund, you've accumulated this funds for over a couple of years, decades, even actually, hopefully a couple of decades. | mapalo | Not supported with pagination yet | |
And now you have this capital, you have this amount of money sitting in your pension or provident fund. | mapalo | Not supported with pagination yet | |
And if you had resigned before from a company and you preserved your funds, so that money perhaps could be sitting in your pension preservation or provident preservation fund. | mapalo | Not supported with pagination yet | |
But also, again, that money could be sitting in a retirement annuity. | mapalo | Not supported with pagination yet | |
So let's say you did work for a company and you had a pension provident fund, but then you supplemented that income through a retirement annuity, or you worked for yourself and you didn't have an employee-employee relationship. | mapalo | Not supported with pagination yet | |
So, meaning that you would have had a retirement annuity to save up for your retirement. | mapalo | Not supported with pagination yet | |
So, those are some of the vehicles that you would use to save up for retirement. | mapalo | Not supported with pagination yet | |
So, now you find yourself, let's say, at the age of 60, and you say, you know what, I'm actually tired. | mapalo | Not supported with pagination yet | |
I want to go and sit at home, look at my grandkids, or travel, or whatever it is that you choose to do. | mapalo | Not supported with pagination yet | |
What options are available to you, or your parent, or your uncle, or your aunt? | mapalo | Not supported with pagination yet | |
So, at that age, and like I said, we're going to use 60 as an example. It can be 65, it can be any age, really. | mapalo | Not supported with pagination yet | |
You have built up this kitty for yourself. So, let us call it 2 million. | mapalo | Not supported with pagination yet | |
Hopefully, it's more because, truly speaking, with the cost of living, it's not a lot of money. | mapalo | Not supported with pagination yet | |
A million rent is not a lot of money. 2 million rand is not a lot of money. | mapalo | Not supported with pagination yet | |
Is but when you subjectively look at it, because remember, and I think there's something also I want to get across: that when we think about retirement, we think about it as this age that, oh my gosh, I'll have 2 million and I'll be sorted. | mapalo | Not supported with pagination yet | |
But remember, when you retire, for example, with our example here at the age of 60, people are living longer, right? | mapalo | Not supported with pagination yet | |
Because of medical advances, because of eating well, taking care of yourself, that sort of thing, people are actually living longer. | mapalo | Not supported with pagination yet | |
So let's make an assumption that you will die at the age of 90. | mapalo | Not supported with pagination yet | |
So you retire at the age of 60. You die at the age of 90. | mapalo | Not supported with pagination yet | |
Between there, between 60 and 90, that's a whole 30 years. That is a long, long time. That is a long time. | mapalo | Not supported with pagination yet | |
And I think if you think about it, if you are in your 20s and you turn 30, it's a big milestone, meaning that you have been alive for 30 years. | mapalo | Not supported with pagination yet | |
So imagine not earning an active income for 30 years. | mapalo | Not supported with pagination yet | |
So if you are young right now and you're watching this, think about it that way: that you know what? | mapalo | Not supported with pagination yet | |
I'm going to need to fund the next 30 years of my life after retirement. | mapalo | Not supported with pagination yet | |
Yes, the definition of retirement actually should change and is changing. | mapalo | Not supported with pagination yet | |
That people don't just go stay at home and do absolutely nothing with their lives. | mapalo | Not supported with pagination yet | |
People, some people still work, consult, and whatever it is. | mapalo | Not supported with pagination yet | |
But those are some of the things that we should start thinking about. | mapalo | Not supported with pagination yet | |
That if you are close to retirement, if it's your parent, they should start thinking, what do I want for myself in this new season, you know, in this last phase of my life? You can call it that. | mapalo | Not supported with pagination yet | |
I know it sounds a little bit morbid, but I think that's why maybe most of the time people don't want to think about retirement because it's like you're edging closer to death. | mapalo | Not supported with pagination yet | |
But you still have so much life, and you should consider what is it that I'm going to do in this period? | mapalo | Not supported with pagination yet | |
And that's the conversation you should actually be having with your parents: that, okay, outside of saying, | mapalo | Not supported with pagination yet | |
yes, you're not going to work actively anymore, you still have skills, you have experience, you have the expertise, you have the number of years that you've worked in whatever industry. | mapalo | Not supported with pagination yet | |
How do you package that so that you can do consulting? | mapalo | Not supported with pagination yet | |
Or if you want to travel, how do you make sure that you are able to fund that? | mapalo | Not supported with pagination yet | |
All right. So you have this amount of money. Let's call it 2 million rand. | mapalo | Not supported with pagination yet | |
And you are at the age of 60, and that's your retirement. | mapalo | Not supported with pagination yet | |
And now you are sitting in front of a financial planner, financial advisor, or somebody coming to your company. | mapalo | Not supported with pagination yet | |
And I want to encourage you: if your parents are close to retirement, don't wait until it's a couple of months before retirement. | mapalo | Not supported with pagination yet | |
You should start having this conversation at least five years before. | mapalo | Not supported with pagination yet | |
You should be sitting down with a professional five years before retirement, maybe even more, and reviewing where you are every single year and to come up with a plan to say, This is where we are, this is what you want to achieve. | mapalo | Not supported with pagination yet | |
And looking at what it is that you have, this is how you're going to achieve that. | mapalo | Not supported with pagination yet | |
And also take into consideration at retirement, there's medical bills. | mapalo | Not supported with pagination yet | |
The medical aid inflation, guys, is terrible. It is terrible. It's not normal inflation. | mapalo | Not supported with pagination yet | |
It goes up by way more than inflation, which right now in April 2025 is sitting at around 3.5%. | mapalo | Not supported with pagination yet | |
But when you look at how much medical aids go up every single year, it's like 8%. | mapalo | Not supported with pagination yet | |
So you have to take that into consideration. You have to take living costs into consideration. | mapalo | Not supported with pagination yet | |
You have to take into consideration, you know, does your parent, and I know with most black people, they want to renovate their houses. | mapalo | Not supported with pagination yet | |
I would travel, but we are a different generation, and you have to allow them to do those things that they want. | mapalo | Not supported with pagination yet | |
You know, I think when I was a younger financial planner and starting out in the industry before I started doing financial education, I used to just be like, No, I don't understand why people just don't, you know, travel. | mapalo | Not supported with pagination yet | |
It's a different generation, and it's okay. Those were their desires. | mapalo | Not supported with pagination yet | |
We have different desires, and we have to acknowledge those and make sure that whoever is sitting with them acknowledges who your parents are and actually draw up a plan that will suit their needs and their desires because they have their desires. | mapalo | Not supported with pagination yet | |
Yes, with us, it could meet it. We look at it from a numbers point, we look at it from our own perspective. | mapalo | Not supported with pagination yet | |
Oh no, you should be traveling. They don't want that. | mapalo | Not supported with pagination yet | |
They want when someone comes to their house, they see that they've bought a new kiss, that they've bought a new room divider. | mapalo | Not supported with pagination yet | |
If that's what they want, that financial planner should speak to them with integrity, with warmness, with, I see you, and I know you've told me your goals, and we're going to try to meet them, not their own point of view. | mapalo | Not supported with pagination yet | |
Okay, like I was when I was younger. I'm glad I'm growing up. | mapalo | Not supported with pagination yet | |
Anyway, so these are the two options that your parents have at retirement from that amount of money. | mapalo | Not supported with pagination yet | |
They have two options: one, it's either to buy a life annuity or a living annuity. | mapalo | Not supported with pagination yet | |
Okay, so when you have a pension fund, when you have a provident fund, legally, and there are many other rules that I'm not going to get into because provident funds used to be treated differently from pension funds. | mapalo | Not supported with pagination yet | |
With a provident fund, before I can't remember the date now, before that, you could take your provident fund in cash, but you would pay tax on that. | mapalo | Not supported with pagination yet | |
Okay, you would pay, obviously, the one-third would be tax-free. | mapalo | Not supported with pagination yet | |
They could still take the two-thirds, but it would be taxed. What happened after? | mapalo | Not supported with pagination yet | |
Oh my gosh, I'm forgetting the date altogether, but I'll write it in the description. I promise. | mapalo | Not supported with pagination yet | |
They said, no, profit funds are going to operate the same way as pension funds, meaning that with the pension fund, legally, you are allowed to take one-third in cash. | mapalo | Not supported with pagination yet | |
That's if you haven't withdrawn from pension and provident funds before, but you are allowed one-third in cash up to $550,000 completely tax-free. | mapalo | Not supported with pagination yet | |
Then, the two-thirds you have to buy an annuity. What is an annuity? | mapalo | Not supported with pagination yet | |
It is income that you will be getting from that product that you bought. | mapalo | Not supported with pagination yet | |
Why did they do this? Not because, oh my gosh, they want to take our money. | mapalo | Not supported with pagination yet | |
No, it was because people would go and blow it. | mapalo | Not supported with pagination yet | |
And a lot of the times, people are not used to huge land sums coming into their accounts. | mapalo | Not supported with pagination yet | |
So they would run out of money. Then the government has to step in and give them some sort of an income. | mapalo | Not supported with pagination yet | |
So it was reducing that, making sure that we reduce our how much we depend on the state. Okay, so that's how it works. | mapalo | Not supported with pagination yet | |
So the two options that are available for your parents, for your uncles, aunts, people in your community is that you get what we call a life annuity or a living annuity. | mapalo | Not supported with pagination yet | |
This is the money that you're going to put. | mapalo | Not supported with pagination yet | |
So the one-third you would have taken in cash and it will come into your bank account. | mapalo | Not supported with pagination yet | |
The two-thirds you have to buy an income and annuity. So this annuity is split. | mapalo | Not supported with pagination yet | |
You can either get a life annuity or a living annuity. | mapalo | Not supported with pagination yet | |
So what is a life annuity? A life annuity is an insurance product that you buy. | mapalo | Not supported with pagination yet | |
Okay. So you are at the age of 60. You say, you know what? I want guaranteed income. | mapalo | Not supported with pagination yet | |
I don't want to run out of money and struggle. | mapalo | Not supported with pagination yet | |
So a life annuity is a product that an insurance company, so think insurance, think about any company that ends with life, Liberty Life, Sundam Life, Old Mutual Life, anything that ends with life, basically. | mapalo | Not supported with pagination yet | |
They have that type of product, a life annuity, where they guarantee that you will get an income until you die. | mapalo | Not supported with pagination yet | |
All right. And you sign up for that and you say, this is the income that you will get. | mapalo | Not supported with pagination yet | |
And for me, I think it is one of the best ways to guarantee that you don't run out of money and that you have money for your essentials. | mapalo | Not supported with pagination yet | |
For me, I would use a life annuity to make sure that the basic stuff is taken care of. | mapalo | Not supported with pagination yet | |
Okay. But there are advantages and disadvantages to everything. | mapalo | Not supported with pagination yet | |
Right. So with a life annuity, the advantage is that it's guaranteed. You will receive that income for life. | mapalo | Not supported with pagination yet | |
If you have a partner or a spouse, you can always say, if I pass away, my spouse will continue to get that income. | mapalo | Not supported with pagination yet | |
Okay. Sometimes, most of the time, it's not inflation-linked. | mapalo | Not supported with pagination yet | |
So you can find yourself in a position like 20 years later that your needs are not completely being met. | mapalo | Not supported with pagination yet |
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