So many opportunities (DALL-E)

In her earlier years, accountant and tax practitioner Annie* and her husband lived the dream – they were true jet setters, complete with fancy wheels and dinners at Michelin-starred restaurants.

However, a year following her husband’s passing, she confronted a harsh reality: No savings and a mountain of debt. She did have a company pension though, and although she never paid extra into her pension, Annie always transferred it when she changed jobs.

Embracing change wholeheartedly

Coming to terms with her new reality, Annie embraced change on all fronts: She sold their Johannesburg flat, paid off the mortgage, made some profit and together with a R90k payout received from her husband’s death benefit, bought a small townhouse.

“So, at 50, I embraced frugality like Scrooge on steroids. Three years of scrimping and scraping later, I said goodbye to debt forever (including the R30k mortgage on my new townhouse). Instead of being miserable in those three years, it felt oddly wonderful watching that mountain of debt dwindle away to nothing,” Annie recounts.

Debt-free, what’s next?

At this juncture, Annie found herself debt-free, in possession of a company pension, and with three months’ living expenses securely stored in an interest-bearing account. “I can’t quite remember the details of that account, but considering how careful and nervous I was at that stage, I suspect it was a 24-hour notice deposit so I could access it quickly.”

Annie then took to the markets.“With newfound financial wisdom (thanks, Simon Brown!), I opened an online trading account and began a long-term investment strategy guided by the almighty PE (price-to-earnings ratio) because frankly, PE is the only thing I really understand.”

She steered clear of market timing, day trading and “…other such madness, except for a brief flirtation with derivatives – I still wring my hands over the R2k I lost.”

Feeling more secure, Annie could now retire at 63 without the looming fear of running out of money ten years later, as per her calculations.

Then came the Great Recession of 2008/2009 – and Annie chose to embrace it as the perfect opportunity to buy into the stock market cheaply. Going against financial best practice, Annie withdrew her three months’ worth of living expenses and invested it in a 50/50 split in both unweighted Satrix and individual Top40 shares over a 6-month period. “I did well, of course, because it was impossible not to. Now I could live to 76.”

Despite her financial success, challenges persisted (think African Bank, Steinhoff…) “And then there’s Naspers – I avoided it like the plague, even opting for unweighted Satrix because of it. The PE was much too high. But even with its recent nosedive, it turns out that it was a terrible decision. Oh well, hindsight and all that…”

Retirement incoming

Approaching retirement, Annie became paranoid about outliving her retirement funds. So during her last year of working, she stopped investing and beefed up her emergency stash to cover 12 months’ worth of living expenses. This meant she could take the minimum 2.5% drawdown from her company pension and nothing from her own portfolio for the first year. “I still don’t know if that made good sense – I just felt much more comfortable doing it.”

Status: Officially retired

Upon Annie’s retirement in October 2014, she allocated the R500k tax-free portion of her pension fund lump sum to a 12-month fixed deposit Nedbank account (“because I’ve never really come to grips with bonds”). She invested the remainder equally in Allan Gray Balanced Fund, Coronation Balanced Plus Fund, and Coronation Balanced Defensive Fund. Ten years later, the funds became lopsided, with Allan Gray excelling and Coronation Defensive lagging far behind.

Annie chose balanced funds as the personal portfolio she established when her husband passed away carries higher risk, giving her the opportunity for growth while her annuities are more protected against risky markets.

“I’m happy enough. Sure, the heady days of sky-high annual growth have disappeared since I retired, but I’m staying ahead of inflation most years. What more can you ask for?”

Status: Officially retired. Bored with retirement

After six months of being retired, Annie got restless. But she didn’t want to go back to her previous profession. “I’d always fancied myself a teacher and writer, so I did a TESOL certification and writing and editing courses.” Annie also did freelance work via the online freelancing platform Upwork for several years (for not a lot of money), but got lucky when she landed a well-paying job at an online publisher in 2022.

Annie’s money landscape today

Her R500k tax-free lump sum fixed deposit gets rolled over year after year.

She has 4 months of living expenses in a 32-day notice savings account.

“My own online portfolio is still intact – the dividends keep piling up and added to the money market, so there’s a big compounding party going on there that I haven’t had to crash yet.”

Together with the interest she’s earning with her annuity (still the 2.5% drawdown from Allan Gray) and the money she’s earning from her new day job, Annie has more than enough for her living expenses and a couple of luxuries too.

Nuggets of wisdom

• “If I had to do it all again, I’d steer clear of debt. I now know the difference between needs and wants and that credit cards and overdrafts are ticking time bombs.”
• “Retirees who pursue their passions, continue working in some capacity, or volunteer are happier and healthier than those who don’t. It’s not just about the money; it’s about keeping your life interesting and learning new things.”
• “And the next old fart who tells me they can’t do anything because they’re not tech-savvy is going to get a slap on the head!”

*Not her real name

Saving for retirement is the biggest investment most of us will ever make. Sadly, it can also be very complicated. In this monthly blog, Carina Jooste responds to common retirement questions, ranging from which products are best suited to different circumstances to efficient tax treatments.