1. Growth through innovation/creativity:
   Rather than be constrained by ideas for new products, services and new markets coming from just a few people, a Thinking Corporation can tap into the employees.
   • For how long do you expect to live, medical factors taken into account?
   • How much do you want to travel?
   • Will you be earning an income during this time?
   • Where do you want to live and many more?
   For couples, this may require conversations long into the night and often needs compromise over priorities and tradeoffs between objectives. It is a common fact in the Western World that longevity is on the increase and retirees today are much more active than their predecessors. Living to 100 or getting close is becoming more and more common. However, it also costs far more to stay healthy and active and visiting friends and family around the world does not come cheap.
2. How much will this lifestyle cost me?
   The first things to plan around are what the basic necessary living costs will amount to, these will include a roof over your head, food and healthcare. Then you need to consider the things that you would like to do. It is advisable to list these wants, their estimated cost, and then rank them in order of priority. Many people call this a “bucket list”.
   Many retirees overestimate how much they can afford to spend in their early years of retirement and run the serious risk of costs running ahead of investment returns. An important factor to bear in mind is the ravaging effects of inflation. Over time this is the silent killer of an investment portfolio that is overly conservative.
3. What strategies can help me?
   Retirees should adopt a strategy that is personally tailored to their appetite for risk, retirement expectations and amount of capital available. Tax is also a vitally important factor to take into account. Having tax efficient investment growth and tax efficient income drawdowns, can be a major positive contributor to increasing the ability of a capital sum to fund retirement.
   Asset allocation and diversification will reduce the risk of the portfolio and ensure that it is capable of withstanding volatile economic conditions. Greed and fear are the two most common attributes that retirees need to avoid when structuring their retirement capital and formulating their investment strategy.
4. How should I drawdown on my asset base?
   The ideal scenario is that retirees should consider generating some form of consulting income in the early retirement years, i.e. reduce the need to immediately draw down on the asset base. This allows the capital to accumulate and can add many years to the life span of this capital. Most people retire in fairly good health with a wealth of skills and wisdom that is much in demand, cashing in on this is an excellent strategy for the first couple of years of retirement.
   Thereafter, a strategy of funding retirement from a number of income sources is often most efficient. This could mean receiving your annual required income from a blend of living annuity drawdowns, interest, dividends and some capital realization. The best strategy is to view all your retirement capital as one big pot, and in some years you may draw differing amounts from different aspects of this pot, and as long as this pot grows in line with the plan, it will be well placed to feed you adequately over the years.
5. How should I treat my retirement annuities and pension funds, lump sums or annuities?
   The immediate dilemma on retirement is what amount to take from retirement annuities and pension funds as a lump sum and what amounts to commute to an annuity. The tax laws in South Africa as pertaining to retirement funds have been the subject of recent changes and the effect has been to align the tax treatment of retirement annuities, pension funds and provident funds.
   Tax effects are normally the major drivers in this decision. To the extent that a tax break is received, a lump sum should be taken, with the balance of the retirement funds commuted to a living annuity. Living annuities are extremely flexible in terms of draw down percentages, and these can be adjusted annually.
6. How can I potentially grow my assets during retirement?
   Retirees in this day and age need to view themselves as long term investors. Retirement now is likely to last far longer than pre-ceding generations. This means that a significant portion of a retirement portfolio must be exposed to growth assets like equities.
   The exact amount of equity exposure will depend on a number of factors and there is no simple solution. Every retiree should examine their cash flow modelling to understand what asset allocation is best suited to their scenario. Retirees must understand that it may be more risky not to expose a portion of the portfolio to equities and rely only on cash and cash like asset classes.
7. What about inflation?
   Inflation is the stealth stalker of many a retirement portfolio. In simplistic terms inflation negatively effects the buying power of money over a period of time. What R1,000 can buy you today is a lot less than what it could buy you five years ago. One only has to consider the ever increasing cost of a necessity like fuel. How much did it cost you to fill up with a tank of petrol two or three years ago, compared to the cost when you fill up today?
   Inflation needs to be factored into a retirement planning cash flow model.
8. What about health care and longevity?
   The average life span of individuals across the Western world is on the increase. However, it does come at a cost! Medical science has made incredible strides over the last few decades and cures abound for all manner of illnesses and replacement body parts are widely available.
   Medical inflation runs significantly higher than the standard inflation rate of 6% as often quoted. Retirement cash flow plans and strategies need to take these factors into account with a suitable cushion for health care costs built into each and every plan.
9. Should I invest offshore?
   Living and retiring on the Southern tip of Africa is not for the faint hearted. South Africa comprises less than 1% of world GDP, so putting all your eggs in this small investment basket is taking a risk. However, balanced with this fact is the view that it is not wise to take exchange rate risk with capital that is designated to fund retirement cash flows.
   Many South African retirees have children and heirs that are living in all corners of the world. Any potential heir living abroad would be grateful for the foresight to rand hedge a forthcoming inheritance.
   Any successful retirement planning strategy must take these factors into account when determining what amount of a portfolio should be offshore and precisely how this offshore exposure should be obtained.
10. Do I need to adjust my strategy?
    We are living in a global economy with information freely available and financial markets open 24 hours a day across many times zones. Any investment strategy is only really 100% relevant at the time that it is drawn up, and a retirement planning strategy is no different.
    One does not want to keep chopping and changing strategy in terms of knee jerk reactions that is akin to closing the stable door after the horse has bolted. However, just as serious is setting up a plan and strategy and then doing nothing in terms of ongoing monitoring and tactical adjustments.

The best retirement planning strategies stick to the underlying fundamental principles of the plan, but do make regular tactical adjustments to take into account changing economic circumstances and to take advantage of opportunities that present themselves. A quality experienced advisor will be well versed in walking the tightrope that gives the portfolio optimum performance.