Retire: A retiree’s investment journey – Part 3

Carina Jooste Latest, Retire, Uncategorized

During the past three months, we talked to retirees Re-tired, Rodney and in this blog post, Gert, about their retirement savings journey. We looked at their different investment approaches, what they wish they had done differently, and how they chose to invest their savings when they retired.

To me, a common denominator across these conversations is the integral role knowledge plays in determining our financial health.

A key insight is knowing the nature of money and how it reacts in different investment products. What’s even more important, is that we share what we learn from our experiences. So without further ado, let’s look at Gert’s financial journey towards retirement – and how it’s working out for him.

Introducing Gert

Gert occupied a specialist managerial position at a leading South African bank before he retired in 2019 at the age of 63. Throughout his working life, Gert’s retirement savings journey was mapped out by the compulsory pension funds offered by his various employers. However, after receiving a recommendation from his life insurance broker to also consider investing in a retirement annuity (RA), Gert immediately signed up.

Adding an RA to his retirement savings pot, bolstered his savings and enabled him to leverage the tax benefits of a Reg 28 retirement product. “I quickly got used to the monthly RA payments and my contributions reduced my taxable income.”

Gert continued this practice of additional savings by investing his bonuses in high-interest rate savings products and ETFs. He also added a tax free savings account (TFSA) to his portfolio.

Gert only changed RA providers once, after he realised how fees and low performance were affecting his returns.

Investment decisions upon retirement

When Gert retired his investment strategy for his savings was similar to the approach he took throughout his working life: Invest in a variety of products.

“Retiring at 63, with a father who’s turning 96 this year, I was forced to consider the possibility that if I get that old, I will run out of funds. So I invested in five different funds with varying degrees of risk.”

When Gert retired he was debt-free, but he still opted to cash out a portion of his savings to purchase an apartment. This he rents out to generate a bit of income. He also took up beekeeping as a hobby, and this brings in some spending money as well.

When he had to choose between a living or guaranteed annuity, Gert opted for a living annuity. “Choosing a living annuity enables me to manage my own destiny. Moreover, the amount that my wife and I could get from a guaranteed annuity would have been insufficient to start with and would have required us to work again to provide another source of income. We’ve only been retired for three years, but with my hobby and the flat bringing in some income, we’ve been able to keep our withdrawal rate on my living annuity low enough that it has actually grown quite reasonably. Should something happen to either of us, the other could consider a guaranteed annuity.”

Gert is comfortable with the investment decisions he made upon retirement. “But 3 years is not a long time, so only time will tell!”

Gert’s golden nuggets for fellow retirees

  • Stay debt-free and get rid of unnecessary expenses.
  • Use a budget tool to control everything, and continue to save and invest.
  • Make use of all the tax breaks available and don’t snub pensioners’ discounts where offered.

“By implementing these key points, we’ve kept our drawdown rate low, and that’s enabled our nest egg to continue growing – by around 43%.”

Retire blog

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.

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