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Retirement Planning Strategy

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Not applicable
Can I get some thoughts on this from the forumites? The benefits of an RA are the upfront tax deductions, but that has to be weighed against a) the performance of the RA - b) the costs associated and c) the tax implications when you actually retire. So my thinking is to take the biggest div paying stocks out there - and buy the dips. Stocks that come to mind are coronation, PSG, Kumba, MMI, PPC - and maybe Remgro. Additional thinking is not to have to do too much work on this - the stocks must be diversified, preferably holding companies, with the exception of a few blue chip 'too big to fail' type companies, like PPC and Kumba. Grindrod might fit into this equation as well. Plan is to live off the dividends in the future, which have the benefit of being tax free.
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34 REPLIES 34
Not applicable
If you are not looking for capital gains so much and just the div, then mix in some pref shares, pay good div that is tax free..combine that with gov bonds..If your horizon is longer pick stock with good growth potential to offset inflation with a good div yield..its the risk factor and how much you need to retire on monthly that you need to calculate..
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Blik
Super Contributor
Another benefit of an RA is that you cannot touch it until you are 55. This also means that it is protected from any claim made on it, for example, during a nasty divorce. Well if that's a benefit.
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Not applicable
Nah, capital gain has to play a large part. Logic is that a good company with good div cover will increase its dividends as the share price grows. So a company like BTI paying 5% now, will be paying 5% in 15 years time, only then the share price will have doubled - and my real div ROI (based on today's investment) will be 10% - which will equal the pref share (or not?) I have a good place for government bonds to be put ... doesn't require sunglasses either
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Not applicable
If that is a requirement, a trust can accomplish the same result?
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Not applicable
Tjaas no bonds ne..I think you have the right strategy, it just sifting through the shares to find the best fit..
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Rams
Super Contributor
without a large portfolio, you cant live off dividends...assume you need R50 000 per month income, you need about R12 million in BHP(6% div).So dividend income to supplement an RA probably more realistic. SATRIX ?
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partridge
Super Contributor
NO NO NO NO NO and a small yes. 1.The comments about RA 's are incomplete, and those about trusts are stark naked. CGT is the secret tax danger. 2.Start with what you want to live on in retirement - based around lifestyle, then see what capital that requires to generate the income needed, then look at the asset allocation you need to meet that, given probable returns from the asset classes ( shares property bonds etc etc ). Then look at the volatility implications - and you are at sqare ONE and iterate around this. 3. Agh -For goodness sake find yourself a professional financial adviser who is fee only based and get on with it( Michael Caine was right " the reason free advice is free is because its no good".)
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Not applicable
Partige are you a financial adviser..?many a person I know retirement fund and planning was shot due to the crash, did they say it was going to happen beforehand..and you should plan for it?no..so always plan for the worst, and don't just take advise randomly..even the experts get it wrong..last point how many of them have not passed or written the required exams..very few, lots of them work on a commission basis and the products they punt are for the set company..
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geordie1
Super Contributor
I like to cover all bases as I do not know which one is best.I have a uk national pension,2 ra's(one paid up),avc account,a paid up provident.a current provident,3 properties(2 rented out one in UK)-shares,property shares,family Trust and a loan account with my cc-I still feel insecure but then that's whay I probably covered all my options-best call I made though was doing my own investing.
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doomsdayza
Super Contributor
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Not applicable
Thanks Doomsday interesting to note
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Alonzo7
Frequent Contributor
In my humble opinion - it is quite simple (it's just that we humans try & complicate things). 1) Determine your monthly requirements + add 10% as a "Buffer" *12 months. 2) Increase this by approx 7% per annum (to cover for Inflation).3)"Basic Vehicles" needed to accomplish this financial monthly needs are the following: (a) Rental Properties (at least 3, BUT 4 or more would be even better...at least 60% - 70% of Bonds on Properties must be Paid up!...for tax purposes) (b) A capital sum of at least R1 Million invested in some good "Blue Chip Companies" for the Dividends primarily. Have at least R250 000 as Cash on Hand (for those emergencies & or for those "dips in the markets"). Naturally you must have no other Debt such as motor vehicles/Credit Cards etc ...."Good Debt" would be excellent (more rental properties)......more rental properties. Life Cover naturally in place & perhaps a nice annuity paying approx between R5000 - R10 000 per month would be ideal. Bottom Line = the more rental fixed property you have the safer & smarter & DO NOT keep up with Mr & Mrs Jones next door. Live within your means & be happy. Cheers
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Not applicable
OK, maybe I opened myself up for the world out there to offer me financial planning advice. THis was not my intention with the thread - but I suppose if you put the word retirement into the topic, you can only expect the worst. It is like walking into a bakery and mentioning the word wedding. And RAMS, you talk out of your derry rear, pardon the french. Where do you think the RA returns are going to come from, if not the stocks they are invested in? My point, was whether I can build a portfolio of high performance dividend paying stocks, that would outperform an RA, despite the RA tax benefits. And the benefits of the stock portfolio, is that hte Divs would be genuinely tax free, rather than the payouts of the RA, which would still be taxable.
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Rams
Super Contributor
Skaap...please read again...you can buy BHP with 12 million now...then you set. But 12 million in BHP on retirement wont give you 50k per month...as dividends go up, so does share price.retiring on dividend income is myth and so is retiring on an RA
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Blik
Super Contributor
Choke - R50K a month - Wow - while that would be awesome, I would have a serious amount to donate since I dont think I could actually spend that amount...I would be very happy on an inflation adjuested monthly income of between R10K and R15K. That covers me completely now with extra to spare. But then again I dont live in the big smoke.
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Rams
Super Contributor
okay then you need to invest 2.4 million in BHP today...for 10k a month income on retirement.
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Blik
Super Contributor
Rams - am still short then....maybe when I get to retirement I'll be able to.
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Not applicable
nope - you will need to invest around R60k per annum - and budget on BHP achieving around 10% per annum compounded growth. That will give you around R4.1 worth of BHP shares in 20 years time
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Rams
Super Contributor
pipedreams....the guy earns R120000 a year....will he risk R60 000 on BHP???And will his income increase by 10%. And will he still need put in R60 000 in his 20Th year?
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