![]() ![]() Seeing that the remainder of the portfolio is all offshore (balanced) funds, I would suggest keeping at least 10% of the portfolio in local conservative funds to absorb exchange rate volatility. ![]() If you are considering the minimum 2.5% per annum drawdown, generally two years’ income provision from conservative funds should be sufficient. The time horizon for local conservative funds is generally three years or shorter. ![]() If the aim is to get maximum global exposure and the drawdown is taken 100% from local funds (depending on the answer to question 1), how much money should be invested in the local fund? Is it calculated on enough to cover 2/3/10 years of drawdown before needing redistribution? ‘Income certainty’ seems to provide many investors with sufficient comfort to commit to a growth strategy with the remainder of the assets.Ģ. This allows the advisor to take sufficient risk with the remainder of the portfolio. I prefer to use an asset-liability matching strategy, which includes a conservative component from where you finance monthly income drawings. Is a drawdown best taken from a local fund such as a money market or income fund or drawdown proportionately from all funds including the global funds? Your overall financial position should be considered holistically, in light of your fixed property and other liquid/illiquid assets, if any.Īssumption: Your RA is commuted into a living annuity holding indirect offshore (asset swap) unit trust funds (similar risk profile moderate).ġ. Be careful not to only consider a scenario of currency depreciation or a continued South African economic contraction. This strategy could make a lot of sense if investors are not already sufficiently diversified across their investment portfolios (including discretionary funds). If none of these implications from your ‘early retirement’ are considered harmful, investors can retire from an RA/pension/provident/preservation funds after the age of 55, subject to specific fund rules. I am retiring from an RA and will be investing in a living annuity….As an income from drawdown is not needed, the minimum drawdown will be used for the foreseeable future R500 000 will be taken as cash upfront to utilise the non-tax advantage.Įxpediting a retirement decision needs careful consideration as some irreversible decisions are brought forward, sometimes prematurely. If a large percentage is invested globally, and my risk is moderate, should the investment be diversified, and which groups of funds (equity, bonds, cash) should be considered?.Is tax like capital gains tax (CGT) paid on drawdown?.Is an exchange-traded fund (ETF)) an absolute no-no in a living annuity because of brokerage fees, with the caveat that drawdown will NOT be taken from the ETF except if a top-up may be needed for funds where drawdown is taken monthly? Therefore brokerage fees won’t be incurred on a regular basis.If the aim is to get maximum global exposure and the drawdown is taken 100% from local funds (depending on the answer to question 1), how much money should be invested in the local fund? Is it calculated on enough to cover 2/3/10 years of drawdown before needing redistribution?.Is a drawdown best taken from a local fund such as a money market or income fund or drawdown proportionately from all funds including the global funds?.My questions relate to the distribution of the remaining funds to be invested in light of the above: As an income from drawdown isn’t needed, the minimum drawdown will be used for the foreseeable future R500 000 will be taken as cash upfront to use the non-tax advantage. The reason for retiring from the RA is to allow global investment and not be restricted by Regulation 28. I am retiring from a retirement annuity (RA) and will be investing in a living annuity. My questions relate to broad principles in investing in a living annuity. ![]()
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