The Ultimate Retirement Annuity Guide

Get some coin! 

*Updated - September 2021

We all hope to have enough money to pay for our monthly expenses (and some extra for fun stuff of course) once we hit retirement. No one wants to eat dog food 3 times a day. Except your dog of course. But I digress...

Retirement Annuities are one of a number of different products designed for the sole purpose of helping you achieve financial freedom in retirement.

Bullet-Proofing The 4% Rule

Don't let the market shoot holes in
your financial freedom

If you are familiar with the 4% rule, you will know that it's a great guide for retirement planning, as well as for managing your drawdown in retirement.

A quick recap on the 4% Rule if this is the first time you are hearing about it – the 4% Rule is based on some research which found that, historically, the maximum starting drawdown (money you take out) of an investment portfolio should not be more than 4% of the portfolio’s value if you don’t want to run out of money in retirement. You can then increase this amount by inflation and, in theory, you should be good for many decades.

Could You Retire Comfortably Using Just A TFSA?

TFSA - the coolest account by far? 

In a pretty unexpected move back in February, Government decided to up the annual contribution limits on Tax Free Savings Accounts (TFSAs) from R33,000 a year (R2750/month if you want to invest monthly) to R36,000 a year (or R3000/month if you want to do it monthly). 

People celebrated everywhere because now it meant that you had a nice round number as a monthly amount :-P. 

TFSA vs RA

Tax wars

*Updated November 2020

Yeah I know, I know, you’ve heard it all before– you need to save for retirement, pay yourself first, and look after your future so that you don’t have to leech off your kids in your old age.

And it’s true, one day you won’t be able to earn an income, and you are going to need to have an investment big enough to pay the bills (and hopefully a little extra for some fun too).

Of Monkeys And Retirement

Better at handling money than most
humans! 

At a training course which I attended a few years ago, the course facilitator told us a story which went a little something like this…

An experiment was set up by putting 5 monkeys into a room. In the centre of the room, directly below a trapdoor in the roof, a ladder was placed.

The scientists then lowered a banana from the trapdoor in the roof. Immediately one of the monkeys spotted the banana and headed up the ladder.

The Best Preservation Fund In South Africa

Money for jam. 

Okay, confession time - I think I need to come clean about my dirty little secret.¹

Despite strongly advocating that everyone should keep their investment fees to a minimum, I haven’t exactly been practising what I preach with all my investments – specifically my preservation fund.

The 4% Rule - Does It Work In South Africa?

4% of the South African flag 

How much money do you need to be financially free?

This is a question that each and every single person should ask themselves.

Putting your head in the sand and hoping that your compulsory monthly contributions to your company's pension fund (if you are lucky enough to have one) is going to be enough for your retirement (early or otherwise) is not a very good strategy.

A Retirement Plan No One Will Tell You About

Stealthy Junior's latest creation 

For those of you who do not know what a TFSA is, it is basically Government’s way of giving you money encouraging people to save and invest. Everything you put into a Tax Free Savings Account is…well….tax free (can’t imagine how they came up with the name…)

So you won’t pay any Capital Gains Tax, and you wont be taxed on any interest, income or dividends. In short TFSA’s are pretty awesome.

The Best RA In South Africa

And the winner is... 

I can see why people often sign up for Retirement Annuities (RA’s) through a financial adviser (paying away a lot of their returns in the process). The RA landscape is quite literally a minefield of hidden charges, commissions, poor performance and what-the-hell-is-going-on-under-the-hood?

Who wouldn't want some help?

So when a Financial Adviser presents someone with a nice glossy brochure showing them that everything is going to be okay, you can’t blame them for asking where to sign.

9 Reasons Why I Don't Like RA's

Dislike

I have been having the RA debate with myself pretty much since the day I started working¹. But I have never taken the plunge.

There has always been something holding me back. Back when I started working I didn't like the ridiculous fees. A few years later, it was the idea of being locked in to monthly contributions for decades which put me off.

Each time I made peace with my decision not to invest, and moved on.

The Money Fountain

Don't judge it by it's cover...

A few weeks back I received an invite to attend an investment talk hosted by ABSA stockbrokers. Sometimes these things are shameless sales punts and so I was hesitant to attend, but seeing I had nothing planned for the proposed evening I decided to drag my wife along for a worst case scenario of some coffee and free food.

The coffee was good, the food was decent (sounds like I'm a terrible free loader!) and it turns out the talk actually wasn't too bad...

What is Early Retirement Anyways?

As the sun of your working career
sets, retirement looms ever nearer...

Okay, so as you know this blog is about living the Stealthy Way in order to spend less, save more and with the ultimate goal of retiring early - in my case at the age of 45 instead of 65. But the question is, what is retirement, and what is early retirement?

So Wikipedia defines retirement as "...the point where a person stops employment completely." But for me, there is more to it than this.