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.
Hiring an Accounting Firm
You will get to find that accounting is always crucial for any business, it is always a great means to making sure that everything works as planned and also the business gets to grow, while conducting accounting processes within a business, it becomes easier to figure out the total or even the overall growth, this means that you can know if you have made some changes with the growth or even if you indeed need to make more.
Looking for an accounting first will be something which will be necessary, it will be a great means to making sure that the strategies of the business will work as expected and also that they can save money, there are many services which can be outsourced which also will guarantee quality and also being much aware, the use of accounting firms being a great way of attaining some accounting services instead of hiring an accountant.
Therefore, there are many advantages to attain from the use of accounting firms, one of them being accurate information, this is something that a business needs, you will need to know what it is that you are making and also the best means to using it, meaning, if there are any profits being achieved, they will be used as either capital or even an investment in other means, this will be the only way to grow.
No one would not like to save money, as an organization, you will need to make sure that you can know of the best means to making sure that you can save some money, this means that looking for an accounting firm will save you some cash, that is, you do need their services from time to time which will ensure that you do not spend much and everything will be in place when need be.
Likewise, organizations do have their preferences, some might see it better looking for an accountant instead of an accounting firm, with proper training, both of these parties will conduct the same job, meaning that they can ensure the organization is always on the right track, therefore, to make the employee much better, training will be needed and there will be nothing better than using an accounting firm to train your accountant, this means they will become better experts.
More so, it will save the organization many losses, they can know whom to hire as their accountant and even what to look for within an accountant, therefore, it will get to benefit both parties since it will be a means to making sure that the employees will be contented and also that the organization will be satisfied, thus making sure that the organization can grow and become much better to providing their clients with what they would need.
Why Hiring a Tax Accounting Specialist Gives you an Advantage It is not cheap to get your taxes prepared professionally, but since you get a lot of benefits from it, it can far outweigh the financial cost. Hiring a tax preparation specialist will give you the peace of mind you need during tax season and the specialist can also help you get a sizable tax refund. There are many people today who are preparing and filing their own tax returns using tax preparation software programs on the market and this a means of saving money for them. People who have complicated tax returns will do well to hire a professional to look at your tax documents and prepare the tax return for you so that you can be assured that it is done accurately. If you want to have a stress free tax season and to pay the correct amount of tax, then it is really important to hire an expert for your tax accounting needs. You also benefit from the thorough knowledge of your professional tax accountant of federal tax laws and requirements as well as your particular state tax laws. You might have an idea of your own tax duties but you may not be aware of certain nuances.
Figuring Out Accountants
And tax laws sometimes change from year to year. This means that the process that worked for you last season might no longer be valid. CPAs and tax preparers are updated on any changes in tax policies that will affect their clients since they attend continuing education courses for this purpose. This can save you from paying penalties and fines and it also maximizes your potential refunds.
If you have multiple sources of income, complicated family situations, rental properties, income in many taxes, or other return scenarios, then it can take your hours or even days to do your taxes on your own, if you can do it at all. Remember that a tax preparation experts can file returns for many clients in a day’s time, five times a week, and even with complex finances, a tax accountant can make sense of it. Time is saved if a professional tax accountant does your tax returns. If you are going to hire a CPA firm or any tax preparation company then you need to organize your financial files before your appointment. If you want to be able to answer the accountant’s questions as he prepares your tax return make sure you study your documents beforehand. Sometimes the questions asked by a tax specialist are targeted and this is so that they can identify deductions that you might have otherwise missed. This also goes for tax credits you might not realize that you are eligible for. This can make a big difference on your return. And, tax preparation fees can be deducted the following year.
The advantages of car insurance policies. For most people who might be having cars, you do know that car insurance is a must, likewise, it is always a safe option, this means that it is the safest means of ensuring you do not spend much money when repairing your car in case of any accidents, likewise, you will find that you can have the ability of making sure that the insurance company can take care of the bills that might have been attained from the accident which therefore will make sure that you can always be well prepared in case of such occurrences. Therefore, you do have to know which insurance company has the best policies, this means that you will need to figure out which insurance policy will get to work best for you, one of the things you will attain with this is quality services, which means that eventually, you can find or attain one of the best services available, this means that you will not have to waste any time looking for an insurance company. Each and everyone needs always to be a law abiding citizen, this means that, you do need to look for the best means of getting to find a great insurance policy, the first step towards achieving this being the knowledge of the state laws and regulations, this will ensure that eventually, you can be able to abide by the set rules and regulations which will ensure that indeed you are happy at all times.
Why No One Talks About Insurance Anymore
When getting to look for the insurance policies, on the other hand, you do need to consider the premiums, meaning that you need to know which policies will work best to making sure that indeed you will be contented and also that you can attain the best services available.
Why No One Talks About Insurance Anymore
You should know of the best means in which you can be able to deal with the insurance policies, this means that you do need to know of the best means of making sure that indeed you can attain the best policies available, this means that indeed you can find someone who can be of some help to you and an individual who will ensure you attain the best policy. Furthermore, it will get to take less time, something which you do need in abundance since with more time, you will be able to look into more insurance policies which will get to make sure that indeed you can be contented with the services provided, more so, you can make a wise decision on which policy you would like to go with for your car.
How To Be Successful In your Real Estate Investing Endeavor
There are a lot of people who firmly believed that real estate investing is a game that only the professionals of this field are allowed to play. Even if there is a hint of truth in this statement, you still need to be informed that many people in the past have already tried real estate investing and they fully understood the fact that if these investments were properly prepared, then, it is impossible for them to acquire profitable returns easily and quickly. For many neophytes in the business of real estate, they will surely encounter a lot of challenges as well as a lot of pitfalls.
In spite of this, if the beginners will choose to take the chance and they will make certain that they are also mentally prepared of accepting all the involved risks, in that case, they may possibly earn more and of course, they will learn more in the process. Although sooner or later, when they will manage to gather a lot of experience, you can make certain that these novices will refine their skills in real estate investing and will close a lot of profitable real estate deals one day. For the reason that your intention is to become an exceptional player in the area of real estate investing, make sure that you will obtain several valuable skills in advance that can assist you in becoming successful in your real estate investing plan.
First, you have to gain knowledge of how to locate the appropriate sellers. Obviously, finding the serious sellers is of great important since they are the people who can assist you in generating a decent profit in this field of real estate investing. It is very important for you to make certain that every seller you will find are all reputable especially if this is the first time you will invest; this is because, you will not want to deal with those sellers who have suspicious reputation.
Make sure that you can become a superior negotiator since this skill is very important when you need to close some really lucrative real estate investing deals. When you are a novice, it will be very helpful for you if you will learn the important skills on how to handle different kinds of real estate investing problems. Keep in mind, your efforts will be deemed a waste of time if you are not capable of negotiating properly for the reason that you will still wind up with very high prices.
It is vital as well for you to become knowledgeable at evaluating different types of real estate investment deals in the most accurate manner. By knowing how to analyze these real estate investment deals, you will have no difficulty understanding how and where to deal successfully.
Source: investment real estate
Advantages of Online Business Loans
In this day and age, traditional banks are not your sole options when you are searching for capital to fund your own business. Whether it is a short term loan or an installment loan you need, there are loans you can apply over the Internet which are known as online loans.
Borrowers from ten years ago would not find online business loans a viable alternative for their needs. Instead, conventional banks were the norm when small business owners were in need of funding. Today, the lion’s share of small business loans are still extended by established banks even though availing of one is easier said than done.
What are the reasons commercial banks make it tough for small businesses to access credit? Whether justified or not, they think that lending to small business remains a risky proposition. There is also the notion that the process of extending credit to small businesses is just as laborious as lending to bigger businesses but with lower returns. The reality is that only a small percentage of small business today can be approved for bank loans.
This is where online business loans become an option. There are online lenders in the lending marketplace to fill the void left by commercial banks that won’t open up credit for small enterprises. If you applied for a bank loan for your startup business and was declined, you may want to consider an online loan. Below are the distinguishing characteristics of an online business loan compared to a bank loan.
Anyone who has tried processing an application for a regular bank loan knows that it can take days before the results are known. This is different from applying to an online lender wherein the process is much, much faster.
The reason for this is that online business lenders are not banking institutions that have to comply with a number of government regulations that slow down the loan approval process. That means online loan processing will also require no paperwork. You do not need to spend a lot of time gathering documents the same way the lender will not spend a lot of time processing them. And like most things online, the use of technology of online business loans will speed up things significantly.
Regular banks tend to offer term loans, credit cards, lines of credit and other traditional business loans. Online business loans, on the other hand, afford you some flexibility when it comes to choosing the loan product that will suit your need. You do not have to limit yourself to the usual loans. Depending on your purpose, there is an online business loan that corresponds to your needs.
In addition, online business loans come in varying amounts subject to how much you need for your small business. If a bank won’t consider processing loans for less than R250,000, online lenders will do it for you from R5,000 to R250,000.
How to Pick a Binary Options Broker There are many different business ventures in which someone can get into, meaning, there are many options in which one can take, when looking for the best business, you need to consider what you would expect from it, meaning, you will have to look for the best means to making sure that everything will work as intended and also that you get to be satisfied, meaning that you will not be wasting your time or even resources. Therefore, some of the things that someone can do is look into the binary options market, in this, you will need to look for a broker, meaning someone who will be able to give you some accurate information so that you can have the best returns possible, this means that eventually, you will get to find some of the best means to making sure that indeed you will be able to move forward. Amongst the things which you will have to do is getting to make sure that indeed you have conducted an assessment or a research, this will ensure that you can find the best expert available, that is, a broker who will aid you in knowing the way forward and also making sure that you can be contented, therefore, it will be the simplest means, to begin with since, by this, you can look into their reputation.
Practical and Helpful Tips: Options
The assessment, therefore, will need you to have some resources, since within the business you get to use the internet, you can use the same means to look for your broker, meaning that the internet will have ample information in which will ensure that you can know of the best ways or means to making sure you can succeed or even get to find the best binary options, broker.
Practical and Helpful Tips: Options
On the other hand, the transparency is something which you will need to look for in a broker, this means that you will have to look for a broker who will be willing to disclose all the options to you, meaning that you will have all the information in what it is that you would stand to make and also what you might lose, this will make your decision-making way much better. Likewise, you will find that most of the transactions are conducted online, meaning that, you get to find the best means to making sure that indeed you can be contented, to do so, you can request or even look for a broker who has some demo accounts, meaning, you will get the thrill of the real account for a while thus being able to make a conclusive decision if you would like to proceed with the broker or not.
Advantages Of Crowdfunding. There are many ways that a business can benefit from crowdfunding. There are many people that believe that when starting a business, you can only raise capital from your own savings or borrowing money from accredited investors or financial institutions; however that is not the case. That means that you should try to read more about crowdfunding online and also identify the best crowdfunding platform that matches your purpose. One of the biggest benefit of using crowdfunding is that it is easy to raise funds for your company without having equity. Therefore, crowdfunding is the best method of funding your new organization since it is not associated with many challenges. Another advantage of using the crowdfunding technique is that you will not experience a lot of risks. You have probably heard people complaining about the challenges that they experienced when trying to raise money for their new business. In addition to looking for adequate funding, you will incur expenses that are difficult to anticipate, difficult in market support, and the people that will assist in growing your company will want a piece of it. Therefore, when you crowdfunding to raise funds for your company, then it will be very easy to avoid these risks since you will get market validation before you even launch your product. Crowdfunding is an efficient way to advertise your products and services. Crowdfunding method is a good method to introduce your organization’s general mission to the customers because it is free and can reach very many people. That demonstrates that there are many benefits of using crowdfunding method to raise money for your business. That means that many potential customers, as well as funders, will be directed to your website. Additionally, when your customers like your products, it will be easy for them to tell their friends and that adds the number of your customers.
Getting To The Point – Money
Starting a new firm can be overwhelming to many people because of the many processes that are included in this particular level. On the other hand, with crowdfunding, it will be easy for you to speak directly to your customers and understand their feelings and views about your company and also products. The comments and feedback that you get from your customers will make the process of starting your organization very easy and efficient. If you use the traditional method of raising funds, then it will be hard to know what your customers prefer and what they do not like about your products and also organization.
5 Lessons Learned: Funds
That is because not only will you be able to present your organization and goods, but also you will have a chance to share the importance of the products. One of the best ways to market your products is through connecting it with a story. However, crowdfunding is very easy because you will only contact a particular crowdfunding website and then share your message.
Some Finance Planning Tips and Advice Any person has one way or another thought of when is the right time for them to retire. Finance planning is important when it comes to retirement and making sure that everything goes well. When it comes to these matters, it is always a must that you do some careful research first. Every single day, every single person gets to face different issues where they have to create an appropriate plan. It is not wise to only make plans at the last minute when things are too late. You should already start carrying out your plans once you are done making them. Doing things the last minute is not always applicable to all things. Eventually, the realization of being able to make plans by utilizing the services from the right professionals and businesses will hit you hard to the core. Getting the best finance planning services is only made possible when you hire a reliable company. It is important that you be able to do some extensive research as regards these things. Your income as well as the plan that you have chosen are two things that give you an idea of what your monthly payments will be. You have to remember how important it is to be able to manage your finances as you embark on this journey. You are only able to attain a brighter future if you make sure that you invest your money appropriately. This basically implies that you should not just depend on your monthly income because without it you can still look after your needs as well as those who depend on you. How do you start finance planning?
Smart Ideas: Services Revisited
For finance planning, it is crucial that you already have a clear idea of the total amount of each of your assets. Generally, this is the first step and it is important that you get it right. Your assets are things that you value including any valuable equipment, your cars, and your properties. It is crucial that you only choose the best among the many finance planning options out there. You should make sure to check online reviews so that you can determine which is really good for you.
Case Study: My Experience With Investments
Getting the best finance plans will definitely provide you with several benefits. Nonetheless, you should remember to also consider the taxes you will be paying. If you happen to have a part of your income that is not taxable, then you should get finance plans. You should only employ a finance planning service provider who can meet your expectations as well as your requirements. Choose one that has already been part of the business for quite some time. By hiring the most reliable and reputable finance planning service provider, you are sure to be saving your money and time. To get the most out of this venture, just make sure that you begin everything by keeping yourself well-informed.
How to Select a Good Small Business 401(k) Plan Definitely, you’ve worked hard to attain your current success levels, and that’s why you’re weighing your options for a nice small business retirement plan. The welfare of your employees is also important to you, and that’s why you want to transfer to them all the benefits that are feasible. At this point, you can decide to offer a company-sponsored 401 (k) retirement plan, which will cover you plus your employees. Normally, this is an important perk by means of which each beneficiary is allowed to choose how they want their savings invested. Thanks to 401 (k) plans, beneficiaries may save and invest a portion of their salary prior to deduction of taxes. Saving with tax-deferred money implies that no state or federal taxes are applicable on the dollars until they’re withdrawn, and usually, that’s at retirement when the participant will be in a lower tax range than presently. There are several misunderstandings that have deterred small companies from adopting realistic retirement plans. The good thing is that a nice 401 (k) retirement plan for you and your employees is no longer the reserve of just big businesses. Today, you’ll find 401 (k) plans that suit the range and budgets of small companies.
The 10 Best Resources For Retirements
A 401 (k) plan can benefit a business of any size, so keep that in mind if you’re a small business owner. In addition, you’re not required, as an employer, to always match employee contributions to enable the employee to reap many benefits. Still, if you find an administrator who focuses on your market, plan management fees are not prohibitive for small firms.
The 10 Best Resources For Retirements
If you want to find a 401 (k) service company, start searching among common financial companies specializing in bookkeeping as well as third party providers of 401 (k) plan administration services, such as insurers, brokerage firms, and mutual fund companies. Ensure that the company you select is well recognized and has a first-rate image in the administration of 401 (k) plans. You need to identify a provide who will take care of the financial requirements of you and your staff today and many years into the future, with extensive resources and first-rate customer services. If your small company has a financial consultant or is engaging an accounting company, you may solicit advice from them concerning this issue. In addition, get in touch with owners of companies similar to yours and discuss their experiences with administrators of 401 (k), asking them to offer good recommendations. The future is always uncertain, but adopting a viable small business retirement plan for you and your employees can provide reliable safety net. Just find a provider of 401 (k) plans that meets your financial needs.
Taking Out Loans Online We have all been using the Internet for quite some time now. The Internet provides a massive amount of information on basically every single subject matter in the world. You can basically get any information that you want by simply browsing through the various websites out there. It is even possible to obtain a loan online now. Online loans are loans which can be obtained by people who apply over the Internet. We have a great desire for convenience, and this has led to the current technological advances that we see every day now. Without even having to change locations, people can now obtain loans using Online loans. To get online loans, all one has to do is access the Internet and review the various websites where they are offered. There is no longer a need for you to meet the lenders personally. These online loan websites are available every single day of the calendar year, all day and night long. These websites will even allow you figure out your credit score for free or for a minimal charge.
The Best Advice About Lenders I’ve Ever Written
A limited number of loan options were offered by only a few lenders in the past. If a person wanted to locate the ideal lender, he/she would have to meet each and every lender face-to-face in order to obtain the necessary information about the various loan possibilities. It is now possible for you to reach out to numerous lenders via the Internet who will be able to offer a nearly endless number of loan options which will be tailored to your individual desires.
Getting To The Point – Services
You can apply online for secure or insecure personal loans, and you can also apply to mortgage or remortgage your property. You will be able to use your loan money for whatever it is that you desire. These lenders are only concerned with the fact that you will make your monthly payments until your loan is paid off in full. There are lenders out there who allow you to use a loan calculator so that you are able to determine your monthly payment the term of the loan. You can request loan quotes from lenders online and compare and contrast to find the best loan for you. It is a rather easy process to take out an online loan nowadays. It only takes a few minutes to fill out an online application form. The details of the application are forwarded to a customer service individual who will review them carefully. It is necessary for you to submit your credit report to this online lender. Depending on your needs, the lender will then be able to send you some loan options. Now you must decide what type of loan it is that you are searching for and how much you are going to be able to pay each month.