In this advice column Jamey Lipschitz from Sanlam Private Wealth answers a question from a reader who wants to know what to do with his share portfolio when he retires.
Q: I have a portfolio of blue chip shares worth around R7 million. I am 63 years old and will have to start using some of my savings to sustain me and my wife in three years time.
My concern is whether I should stay in shares or should I sell and invest in something else? I am worried about what the markets are doing, and need some peace of mind.
I will need around R700 000 a year, and I have some annuities as backup.
There are a number of important issues that someone in this position would need to consider.
Firstly, South Africa and most of the world is in a low-yield environment at the moment. Some countries are actually providing a negative yield on cash investments for the first time in history.
This has forced investors into higher risk asset classes like equities and property for the relatively higher yield they provide. At the same time, however, this has pushed up the valuations of these asset classes and many are now considered expensive. In turn, the relative yield on these asset classes have come under pressure as the prices have increased.
Secondly, even the current situation notwithstanding, equities are considered high risk compared to other asset classes. It is therefore important to establish what percentage exposure to equities is appropriate based on an investor’s risk profile and income requirements.
There are periods when equities do not perform and one must be able to stay invested for the long term and not be a forced seller for income purposes. This will ensure that one derives the full upside and value.
Thirdly, the dividend yield on South African equities is currently approximately 3%. That means that a R7 million equity portfolio would yield around R210 000 per annum. That is a shortfall of R490 000 every year on the R700 000 income required.
There are certain equities that provide a higher yield, but making changes will potentially incur capital gains tax and brokerage charges, which will lower the overall value of the investment. One must also consider the 15% tax on dividends when calculating the income that one will be receiving.
Fourthly, other asset classes like preference shares and bonds provide a higher income yield, however, their potential for capital growth is generally more limited than equities over longer periods. Bonds (fixed income) are also taxed at the investors’ marginal rate (potentially 41%) as opposed to the 15% tax on dividends for preference shares and equities.
The short answer to your question is that you will be paying R191 820.51 tax on a retirement fund value of R947 113. In other words, 20.25% of your retirement benefit will be paid to the South African Revenue Service (Sars).
How this is calculated is that your capital will be taxed on a sliding scale. The first R25 000 is tax free, the next R635 000 will be taxed at 18% and the balance will be taxed at 27%. Although not relevant in this instance, any amount over R990 000 would be taxed at 36%.
However, you can avoid this tax entirely by transferring the benefit to a preservation fund. This is an option you should seriously consider.
A preservation fund works in the same way as a retirement fund, except that you don’t have to keep contributing to it. You will be able to make one withdrawal from this fund before your retirement date, but otherwise you won’t be able to access the money until you turn 55.
Once you retire from the fund, the first R500 000, less any amount you have already withdrawn, will be paid out tax free. At this point you can withdraw up to one third of the capital as a lump sum if you like, but the rest must be used to arrange a monthly income during retirement. You will be taxed on your monthly income according to Sars income tax tables.
Why this is particularly important is because if you withdraw your retirement capital now, the R500 000 tax-free benefit that you would receive when you actually retire will fall away. So you will be suffering a double tax penalty.
Apart from the tax you will have to pay now, you should also consider the important differences between putting the money into a preservation fund and taking it out to invest yourself.
A lot of people who get a bonus or once off additional income for whatever reason, tend to ‘blow it’ as you have pointed out. It is therefore a very good idea to try to think of better things to do with the money. I would, however, suggest that you consider not only your immediate or short term needs but also the long term potential of any extra income you receive – no matter how small.
If you have a need for extra monthly income, which might be the case if you are currently using a credit card or overdraft because your expenses are close to or more than your current monthly income, then I support your idea of putting the money in a vehicle that will allow you to supplement your income for the next two years.
A two year term, however, is a very short time horizon for an investment and I assume you intend to be drawing the full amount over the two years. In other words, you will be left with nothing at the end.
If so, you will need access to the money and very little, if any, risk. With these constraints in mind, I would suggest either multi-asset income unit trusts – the top funds produce between 8% and 10% per annum historically – or a bank savings, call or money market account with cash immediately available. These bank accounts produce between 5.5% and 7.5% per annum, depending on the amount.
Let’s use an example and say the amount is R50 000. If you can achieve returns of 10% per annum for the next two years, this will produce an income of R2 307 per month for 24 months before being depleted. At 7% per annum, the monthly amount will be R2 194 per month, so there is only a small difference, which means it is probably not worth taking the extra risk.
The question is whether you actually need additional income or if you are just going to be spending it over 24 months instead of one month. If you don’t really have a requirement for the additional income, you may want to consider investing the amount for a longer term so that it can produce even more for you.
You could consider putting the money into a tax-free savings account or retirement annuity (RA). By contributing to an RA, you would be reducing your taxable income. This means you could get something more back from the South African Revenue Service next year, depending on what retirement contributions you are already making.
Let’s use the same R50 000 we used for the example above and assume that you are below the maximum deductible contributions to your retirement funding. This is currently 27.5% of your remuneration or taxable income, or R350 000 per annum, whichever is lower.
Let’s also assume that you are in a 36% tax bracket. If that is the case, you would get an additional R18 000 back from SARS or have to pay in R18 000 less for income tax when you submit your next return. In other words, you receive your R50 000 dividend, you invest it into an RA which results in you having an extra R18 000 next year, and the R50 000 also grows until you retire. You can only access the money in an RA once you turn 55.
The tax free savings account option wouldn’t allow you to deduct contributions for tax, but it also doesn’t tie the money up until retirement. Taking into account that growth and income in the investment is not taxed, you can benefit hugely if you think of it as an additional retirement savings plan.
Different Types of Credit Counseling
What you will need for credit counseling would be a reputable agency to which will give services and provides you with various options. When you approached a credit counseling firm, you surely will be surprised to see that various kind of services are being provided in order to help satisfy your needs. Every aspect with your debt relief is going to be treated through a particular service. Through this article, you will be able to know some of the services to which are offered by a credit counseling service in order to satisfy your needs.
The first thing that we need to know about first is what credit counseling is. This will refer to counseling and practical aid to which you could acquire from an organization so you will be out of debt. This will involve the case of following some advice to how you will be able to get out of debt and help prevent yourself to be more in debt. The services to which you would find below are services that are being offered by a credit counseling agency.
Housing credit counseling is a type of service to which is offered to you through credit-counseling agencies. A service like this is going to give you advice if it will be financially okay to borrow money or to buy a house. The agency will actually help you to get advice that saves you from going bankrupt when you are planning to get a new home. Such option in fact is considered as most likely when you have to borrow when you are planning to purchase for a home.
Reverse mortgage services are offered mostly towards elderly people. This actually is for people that are 60 years old and higher. A service like this is going to enable you to borrow more money even when you are still unable to pay your mortgage. The condition for it is that you need to live in that house for you to be not obligated in paying off the loan.
Educational services are also still provided by credit counseling agencies. The service will instruct you with some basic approach to learning self-mastery with financial control. They in fact will organize workshops and seminars and is going to give you educational materials that are helpful.
Another would be budget and credit advice service, which is actually the core of credit counseling service. This actually is what makes such agency a credit counselor. You are going to be provided with a particular counseling that talks with certain financial situations that borders you. Whatever your needs are, the agency will advise you and is going to lead you to financial independence.
The services to which are provided above are not the only things to which are being provided by credit counseling firms. There actually are still others that are made to tackle certain areas of credit counseling.
Buying a Home: How Can You Afford It?
Buying a home is a big investment. It takes a lot of saving up so that you can buy the house that you dreamed of. You must understand that anyone who dreams about this need to be ready to take on the challenge. However, buying a home for the first time can be very exciting. Today, housing is not cheap. In fact, finding for a well-paid job these days is not easy. That makes this dream very hard to achieve. You should understand that there are some good news that you can find these days despite the challenges that you are facing.
What you need to do is to get on the proper ladder because if you do, you will surely have the rewards that you have been looking for. If it is also the rewards that you are after, then don’t lose hope, continue to find ways that you can climb the property ladder for that matter. The good news is that you can now save up money so that you can buy the house that you have been dreaming of. The first thing you need to do is to look for an advice on how to get it and these advices can be found in this article. The advices that you are going to get here will help you save a lot of money. Have you made your research already when it comes to this? This is important so that you can avoid becoming a victim of schemes for that matter especially if it is your first time to buy a house. You have to look for some ideas so that you can get a low cost mortgage. Aside from that, it is also very useful if you ask help from your parents when it comes to this. They can be your guarantor if you can’t find one. So when time comes that you can’t pay for the mortgage anymore, they will be the ones to do it for you.
Part of the step is for you to look for the best deal you can find from the many options available. If not, you can also consider the other option which is for you to get a loan. If this is the best option you can think of, make sure you use a homeloan calculator to know what is affordable for you to borrow in terms of money repayments. This is a good investment so that you can be sure that you are not short of money that you need to pay. Your dream home can actually be achieved if you start your savings now. If you are interested with this idea, you have to go to the bank now and open a savings account where you can place all of your savings.
Some Tips about the Music Startup Industry
The music industry is undergoing changes because of the influx of startups that now gives artists more control with their careers. Before it was thought to be a dying scene, but the music industry is actually reviving itself through change, everything with how this is made and is consumed to the case on how musicians are compensated for their work.
Most of the music startups are in fact made to target one of the two markets, which are either the fans or the musicians. What you will learn below are some of the things about the music startup industry.
If you are a musician and an entrepreneur, you may already have known how tough it could be in standing out from the rest. But when you already have stood on both sides on each of these industries, you may have noticed already which are the usual strategies that successful companies use. You can however use music and technology in order to help grow your startup.
With the new technologies today that are opening their doors to fans for interacting with musicians in a more tangible way, it helps to give more opportunities for the entrepreneurs and the artist as well. This will greatly increase interaction with millennials and your social media engagement rates will also increase a lot.
For you to actually succeed with the millennials, you have to adapt yourself on the generational shift to which is happening, in a way to where they are going to consume, listen and engage with music. You could in fact engage them with their own turf by incorporating music with your startup’s marketing initiatives by searching a publisher who has a music library that could suit your needs and then licensing music that would appeal them.
After you have found the right music in enhancing your special event or in advertising campaign, you could then license that song in order to launch a new product like what Jeep did with the song Renegades, which actually is the ideal tune for capturing millennial hearts with the message that echoes Jeep’s which are new vehicles that are perfect for adventure.
After the younger fans will see you supporting their favorite artist, they then will be able to know your startup shares the same values with them. This is then going to help form an instant emotional connection with your company. Different startup firms will not only help enhance live music experience, but also with the streaming one. For some websites, their platform actually offers mobile-streaming capabilities with live music events that includes intimate performances, unique concerts, programming and music festivals with multistage and multi day coverages.
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Financial Advice 2017: The Most Important Thing to Do for Achieving Financial Freedom Wealth plan is the key to financial freedom, however, most people are paying experts to provide them a financial plan or investment plan instead. You might think that you already have secured your wealth and all you have to do is to plan where, when and how it will be utilized and invested. What you have actually done is the conventional type of wealth planning, leaving some degree of uncertainty, still keeping you worried whether or not you will really have enough money to do what you have to do. Internalize and realize if you are able to achieve financial freedom by enjoying your retirement before you get too old, switching to a more fulfilling career, staying home with your new baby without having to go back to work, paying your kid’s college without sacrificing retirement or going into debt, and pursuing your business dream without breaking your finances. Having a unique wealth plan surpasses the conventional approach, which effectively allows people to achieve financial freedom despite market crash and deflation that mostly cause a financial collapse. An effective wealth plan must have a strategic integration of all major aspects of your life using proven methods in guiding you in your decision-making, affecting the achievement of financial independence. Effective wealth planning must cover all asset classes such as business, real estate, and paper assets, and not merely buy stocks, mutual funds or other financial products financial advisors sell. There must be an integration of personal life and financial life with the application of holistic solutions basing on your interests, resources, and unique skills, because your personal financial goal is about your future and your family’s future, more than just the money involved. To achieve financial freedom, advanced planning is needed to achieve effective wealth planning must be based on a different set of principles than the conventional financial planning, with a stronger foundation and producing bigger positive results. Advanced wealth planning can be discussed by an expert financial advisor, to ensure that the financial goals are aligned accordingly with facts and proven methods, so financial efforts are not wasted. Indeed a personalized written wealth plan is the most important aspect of achieving financial freedom. Our financial wealth plan involves a careful engineering based on scientific research with rational financial aspects. And we are shocked with the amazing results that our clients told us, so we continue to provide in-depth financial coaching to achieve financial freedom. We have one of the best financial advisors who can help you gain financial freedom through our effective advanced wealth planning, so feel free to visit our website for more details.Smart Tips For Uncovering Resources
A Comparison Between Renting And Buying A Home: Which One Is Best?
Just a mere thought of relocation is somehow exciting and somehow refreshing.
When it comes to this kind of situation people are often at a crossroads, whether they are going to avail a mortgage or they will just rent a property. One thing is for sure, both options requires huge financial expenditure at a given time.
If you want to make a sound decision, then you must see to it that you are able to weigh your options and gather relevant information about them.
The Positive Implications of A Mortgage
If you are going to avail a mortgage then you are able to own a particular property. With the information at hand, it only means that you are able to decide with regards to the exterior and interior design of the house without any hassles.
This is also a good option if you intend to stay for a particular place for a long period of time, for instance five years or more. By staying for a particular home for long period of time, you will be able to regain the expenses that you spend in purchasing the property at a future date.
You must be aware that most banks will require their clients to start up with a 20% deposit on the property.
For instance, you have a significant amount of money save in a particular bank or you are capable of providing a 20% deposit then you are an ideal applicant for a mortgage.
As much as possible look for lenders that offer low- interest rate, this way you will pay lesser amount of money for the loan which makes it a good investment on your part.
If you want to know more about the mortgage rates then it would be best if you are going to use a home loan repayment calculator to know the estimated amount that you will pay for every month.
If you intend to rent a home then the monthly payments will go directly to the property-owner. The money that they are able to get from your payment will be used for the mortgage of the property. Thus, is renting the best option that you’ve got?
The Benefits of Renting A Home
With the information that you’ve got from reading the advantages of a mortgage, you may have already a decision in mind.
However, it is also imperative for you to know the significant benefits that you can get from renting.
You must bear in mind that buying a mortgage is quite pricey. As mentioned earlier, you must pay a deposit on the property which is also different from your monthly payments.
Renting is your best decision if you have financial constraints.
FOR IMMEDIATE RELEASE
MADISON, S.D. — A recent report by the federal Government Accountability Office (GAO) highlighted how older borrowers now make up the fastest-growing group of those with student loan debt. With the size of this group having increased by a factor of four over just the last ten years, many Americans are facing challenges of unprecedented kinds. New resources online at detail effective ways by which older student loan recipients and others can lighten their debt burdens.
With many such helpful guides and other features online, Student Loan Help Info also offers free, no-obligation consultations to all. As keeping up with student loans becomes an increasingly pressing concern even to many not traditionally associated with this kind of borrowing, visitors to can count on plenty of useful information and advice.
“Like so many others, we read the recent GAO report on older student loan recipients with great interest,” a Student Loan Help Info representative stated, “Whether because of carrying student debt for decades after graduating or trying to help fund the education of their children, the number of Americans over the age of sixty who are responsible for student loans has exploded in recent years. For people only a few short years from retirement, that can raise a number of important questions. Social Security benefits can even be garnished should some older borrowers default, so staying on top of payments could hardly be more important.”
A December, 2016, report by the GAO found that well over 100,000 Americans past the age of 50 had been subject to garnishment of Social Security benefits as a result of defaulting on their student loan debts. With over $1.1 billion in payments already collected this way, less than a third of the money was used to pay down loan principal, with the rest instead counting against fees and interest.
As a top source of assistance for all those seeking help with their own debts, Student Loan Help Info maintains online resources that can be of great help to the increasing number of Americans in this and similar situations. A visit to the Student Loan Help Info website at will help bring any borrower up to speed with their options, from various loan forgiveness programs to debt consolidation. In addition, older Americans and all others with student loans to pay off are invited to get in touch for a free, no-obligation consultation with an experienced, informed Student Loan Help Info agent.
About Student Loan Help Info:
Offering free consultations, expert advice, and ongoing support, Student Loan Help Info helps borrowers take control of their debts and find the best possible way of moving forward.
What to Consider When Buying Medical Marijuana Stocks It is widely thought that legalization of marijuana for pleasurable use in many states is the reason for the latest interest and increase in the growth rate of the medical marijuana industry, but that’s not true. As a matter of fact, major discoveries pertaining to medical drugs obtained from cannabis have caused medical marijuana to command the serious attention of many researchers and medical experts. This has resulted in the establishment of companies that are not only researching, but also developing marijuana-based drugs that can solve specific health complications. And if you desire to buy medical marijuana stocks, you can look at options in some of the companies researching and developing medical marijuana. Understanding What You’re Getting Into Marijuana stocks exchange for less than $5 per share, and that is why they are categorized as penny stocks. Although all kind of investing in stocks carries a certain amount of risks, trading in penny stocks is considered riskier. Medical cannabis constitutes penny stock, and it can only be exchanged over the counter. Ordinarily, you won’t obtain a lot of info, data, or metrics about any kind of shares not available in a recognized stocks exchange. If you cannot find any helpful information about the health status of your preferred marijuana stock in real time, going ahead and investing in it is risky.
What Do You Know About Plants
With that said, due diligence can help when you want to invest in medical marijuana stocks. Start by identifying a stock that you should consider investing in. Next, research the company obtain all the facts about it, including what exactly they’re involved in, any medication they’re researching, and any marijuana-based drugs they’ve developed. Subsequently, investigate the specific company and discover all the facts about it, such as what exactly they do, the drugs they’re studying, and any cannabis-based treatments they’ve developed. Has the stock come up with medication that has either been okayed by or is waiting for the nod from the FDA?
Why not learn more about Marijuana?
Know a Stock Well A company that is well beyond the research phase of a marijuana medication typically has a better chance of succeeding, and you may consider its stock as viable. If the FDA has approved one of the company’s treatments, this is likely a sound investment choice. Nevertheless, investigate how the company has been performing as a stock over some time. In case the company’s shares have nosedived at some, can you figure out why, and is there a chance it was because of their treatments being found to be ineffective or having been disapproved by the FDA? Timing is vital–take that into account when purchasing any kind of shares, including medical marijuana stocks. Certainly, a stock that has just announced major breakthrough in the development of a marijuana-based treatment will soar, but the best perks will go to those who invested prior to the announcement when the stocks were cheaper.
What You Should Know Before Buying Medical Marijuana Stock The legalization of use of marijuana for medical cases in some states has made many investors excited and in turn, are buying stocks of the companies that offer the product. The debate and controversy of medical marijuana has led to increased activity on the penny stocks counters as traders buy in anticipation of great profits. However, you should be cautious and do your research well before choosing to buy any medical marijuana stocks. Most people do not carry out a background check on the companies whose stocks they want to buy. You need to be sober to make a good investment decision. Remember, as an investor you are stacking a claim in the company’s finances, not the business of medical marijuana. Studies have shown that most average investors buy or sell stock based on the information they get from the news. If you are only relying on the news for information regarding stock investment decisions, this can be both good and bad. The past stock market crashes made one things clear: investing in stocks without carrying out research is dangerous. When you are only following the news to make your investment decisions, your success is likely to come to a sudden halt and leave you with painful losses. This being the case, you should carry out your due diligence before choosing to buy medical marijuana stocks. Before investing, consider the following: Research the Company You should find out more about the medical marijuana company whose stocks you wish to buy. Find out about the company’s products, business model and how it is run. There are various ways you can find out about a company and how it works. For example, you can go through its website for more information. Another option is to contact the company and find out whether you can get investor educational content. You can also know more about a company by attending one of its public meetings. When you gather information from different sources, you will have a better understanding of the company’s business model.
Short Course on Plants – Getting to Square 1
Is the Company Profitable? Profitably of the company you want to invest in is another thing you should consider. It can be quite a challenge to know whether or not a company is profitable. This is because many things can determine the profitability of a company. Check the quarterly and annual financial reports of a company to know of its earnings within a specific period. Make sure the income is broken down in dollars and in per-share earnings.
Learning The Secrets About Stocks
Company’s Earning History Confirm whether the medical marijuana company you want to invest in has been making profits. You can scan old news stories and check the company’s past financial records for this information.
Top Services an Accountant Offers to Businesses Running a business isn’t easy. You have to ensure every aspect of it is running properly and the finances are in order. Although you may be able to do all these things by yourself, they’ll take a lot of your time and you’ll have to sleep for very few hours in order to meet your targets. The last thing you want to do is to deal finances when you are suffering from fatigue. This is why you need the services of professional accountant to help you manage the finances properly keeping your business running as it should. You can decide to hire a full-time company accountant or you can choose to only hire on a part-time basis when you need a certain task done. Accountants are specialized in different areas, make sure you choose one who is specialized in your field. This is the only way to make sure the accountant delivers what you expect. Here are some of the services that you will get from an accountant. Bookkeeping is undoubtedly an essential part of any business that deals with many functions such as keeping sales ledgers, recording financial transactions, preparing financial statements, and maintaining business journals. The way finances are managed is crucial to business operations. Getting a good bookkeeper is the first step towards ensuring proper financial management.
Questions About Experts You Must Know the Answers To
Since employees are a crucial part of the business, you need to pay them on time. An accountant will work to make sure that the pay slips are prepared on time and the wages, deductions, and tax information is completed. This process is tiresome and the accountant will have eased a big burden off your shoulder. The accountant will also prepare financial statements and payroll taxes as well as deal with any queries arising from the salaries.
The Art of Mastering Accountants
Filing VAT can be complicated especially when you do not know which amount is to be taxed and which one isn’t. You wouldn’t be worried about such things when you have an accountant in your company. This is because he or she will undertake duties such as filing taxes and even determine when the business will get a tax cut. The auditor will also do financial audits and help determine the financial future of the business. Choosing a certified accountant is the first step towards financial management in your organization. Ensure that you get the right person by studying the portfolios of the accountants you have shortlisted. Always go with an accountant who has a lot of experience working in a company similar to yours.
Importance of Using Binary Options Trading
What you need to learn about binary options trading.
There will be two positions for investment with an asset price in using a binary options trading. If you want a great result for your investment, you have to make sure that the closing position will be accurately understood.
You will have two options to choose from, the common ones are “high” option and “low” option. Before making any prediction, you have to make sure that you have already started with the time duration agreement. It is a common thing that even before when the trading began to start, the asset’s price should already have been finished higher or lower. The trader must have a fixed return from his or her investment. It is true that the right side will contain the starting price of the trader. And if the trader predicts the price wrongly, he will lose the amount that he invested before the trade was opened.
The benefits of binary options trading.
Apparently, when you are using binary options trading, you will be able to have ease in buying and selling of stocks given that you also have knowledge about it a little.
When an investor will be doing trading, he or she will have to select products and purchase them and use them as stocks for his or her business. Before you can get the asset’s price, you will have to work on calculating the share price of each individual.
A trader or investor will get good return from selling the products that he has when the source of the product’s price has risen in price. And also it is common knowledge that the investor will lose money if he or she sells the product lesser than the price that he spend to buy them.
And this is why you have to make sure that you have knowledge over this type of situation so that you will know how to invest. And also you have to have information about the financial markets function, this will be very vital to your role as an investor. Accurate information is needed for this kind of situation, that is why you will have to study the asset’s price movements over the past years because you will have to know whether or not it will be a good investment or not. You will have to focus on past, present and future situation of the asset that you have. Know the reason why it had price changes and also you have to know the asset’s standing in the near future, will it have a price hike or will it lower? This is because you have to know whether or not it will be a good investment. You have to make sure that you will gain good return from the investment and do not settle for an okay kind of investment.
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