Your retirement and saving questions answered

PSG Wealth answers your questions. Picture: Independent Newspapers.

PSG Wealth answers your questions. Picture: Independent Newspapers.

Published Jan 26, 2024


After 40 years in my career, I am thinking about taking early retirement this year after suffering a health setback recently. Will I be able to access my retirement savings, or should I rather continue working, even if I can only manage reduced hours?

Chrisley Botha, Wealth Adviser at PSG Wealth:

As you consider early retirement after 40 years in your career, weighed against recent health issues, it’s vital to thoroughly evaluate your financial readiness and the lasting effects of this choice.

In terms of legislation, retiring from a pension fund allows a maximum of one-third of your benefits as cash, with the rest buying an annuity for a steady income. Should your retirement fund’s balance be below R247 500, you are entitled to withdraw the entire amount. For balances exceeding R247 500, only one-third can be taken as cash.

The same applies to provident fund contributions after 1 March 2021 (depending on how old you were on that date). Up to 100% of provident fund contributions before this date can be taken as cash. From any lump sums taken at retirement, the first R550 000 is exempt from tax, provided there have been no prior withdrawals.

It’s crucial to calculate your post-tax income to ensure it meets your needs – especially as you will now have additional retirement years you need to fund, as well as the added medical expenses.

Opting for retirement even a year earlier can impact your savings notably. Just one more year of growth could significantly boost your accumulated retirement savings, but withdrawing early might reduce capital growth and annuity income.

Additionally, healthcare costs are also a primary retirement consideration. Moving from an employer’s group scheme to private medical aid is often more expensive, with costs rising as you age. To solely cover medical premiums and expenses for 20 years in retirement, you'd need to save around R3 million extra. This assumes starting premiums of R4 000 monthly, increasing 7% annually due to medical inflation, over 20 years, considering a 5% annual return on savings.

Early retirement may attract interest, particularly with health concerns, but understanding its financial impact, effect on savings, and heightened healthcare costs is essential. Meticulous planning and professional advice are key to a financially secure retirement that aligns with your health and personal needs.

Over the past year, I’ve been battling to stick to my financial plan and also experienced unforeseen costs during the holidays. Previously, I could save a bit of money each month, but I’m now unable to save anything as I’m still paying back the extra costs. What’s the best thing to do and how can I get back on track?

Dulcie Weyks, Financial Adviser, PSG Wealth, Waterkloof:

The first thing to do to help you have a clear overview of your income and expenses is to create a realistic monthly budget. Recognise areas where you can cut back on expenses, such as entertainment and dining. Explore the possibility of transitioning to a pay-as-you-go cellphone plan with defined usage limits to align with your monthly financial objectives. Consult with a certified financial adviser to assess potential savings on both short-term and long-term insurance premiums.

After cutting expenses, accelerate debt repayment by exceeding the minimum monthly payments. The best way to get out of debt is to pay more than is expected every month. Since payments cover both the principal amount and interest, paying more accelerates the reduction of the principal amount. In addition to this, you could channel whatever extra money you can into your smallest debt, while continuing the minimum payments on your other loans.

Once the smallest debt is settled, take the sum you had previously contributed and incorporate it into the monthly payments for your next-smallest debt. The mental boost you get when you see a debt cleared will encourage you to continue with the process.

One of the best ways to save money is to set a goal. Identify what you want to save for, considering both short-term needs (emergency funds, vacations, etc) and long-term objectives (such as your child’s education or retirement). Estimate how much money you’ll need, how long it will take you to save it, and include these saving goals in your budget.

Now you are set to go. A qualified financial adviser can assist you with the process and help you to stay on track to achieve your goals.

I am a 34-year-old and would like to start my investment journey this year. What is the best investment strategy to pick?

Richus Nel, Financial Adviser at PSG Wealth, Old Oak:

Embarking on your investment journey is a commendable decision that can pave the way for financial growth and security. When choosing the best investment strategy for yourself, it’s crucial to align your approach with your specific goals, risk tolerance, and financial situation.

As with any journey, it is important to take a realistic view of where you are and where you want to finish.

The best journeys are not always the ones where you get to finish first. Therefore, investing requires a mindset that goes beyond short-term fluctuations and instant gratification. It demands a deep understanding of the road ahead, the willingness to stay the course, and the ability to weather temporary storms.

Individualised investment journey/strategy suggested:

Seek professional guidance: If you find the investment landscape overwhelming, don’t hesitate to seek advice from a financial adviser. They can provide personalised guidance based on your unique circumstances and help you navigate the financial markets.

Set out an emergency fund: Before diving into investments, ensure you have an emergency fund. This serves as a financial safety net and should cover 3 to 6 months’ worth of living expenses. It prevents the need to use your investments during unexpected financial challenges.

Include diversity on your journey: This may include stocks, bonds or real estate and can help mitigate the impact of poor performance in any single investment.

Educate yourself: Take the time to learn about different investment options and get to know the basics. A well-informed investor is better equipped to make sound decisions.

Consistency is key: Regularly contribute to your investments, even if it’s a small amount. This practice can help smooth out the impact of market volatility over time.

Remember that there is no one-size-fits-all approach to investing. Your strategy should be tailored to your individual circumstances. Always consider seeking professional advice before making significant financial decisions.

As a business owner, I am aware that employee fraud could endanger my operations. Could you please advise on how I can insure my business against it?

Karen Rimmer, Head: Distribution at PSG Insure:

Protecting your business against the reputational and financial impact that often accompanies cases of fraud requires company-wide and preventative measures, as well as the correct level of insurance cover.

This would include preventing employee fraud by conducting robust background checks during the hiring process, as well as taking out fidelity cover, which is a section that can be added to your commercial policy. This can help to provide you with comprehensive protection against employee fraud and theft.

When safeguarding your business against fraud, it’s important to remember that you also need to be prepared for instances of cybercrime. This entails having robust authentication processes and anti-virus solutions in place, as well as comprehensive cyber insurance cover.

I’d recommend that you talk to an adviser. They can help you ensure your business is sufficiently prepared.