2. MONEY TALK @ RETIREMENT

3. THE GOOSE THAT LAID THE GOLDEN EGGS

5. 1. HOW THE NUMBERS WORK

6. 4 NUMBERS IN THE FORMULA

7. Income Lifespan % R

8. R Income Lifespan %

9. yearcapitalgrowthAnnual icome shortfall/ surplus 11 000 000100 00080 00020 000 21 020 000102 00084 40017 200 31 037 200103 72089 88813 832 41 051 032105 10395 2819 822 51 060 854106 085100 9985 087 61 065 941106 594107 058-464 71 065 477106 548113 482-6 934 81 058 543105 854120 290-14 436 inflation6% growth10% Pg 16

11. INCOME TARGET TABLE INFLATION +4% RETURN Male Female Age Life Expectancy Yrs Mnths % Of Capital as Income Monthly Income per R1'000'000 Age Life Expectancy Yrs Mnths % Of Capital as Income Monthly Income per R1'000'000 453036.0%4,986 4535105.5%4,605 5025116.5%5,413 503135.9%4,907 5521107.2%5,986 5526106.4%5,310 6017118.2%6,802 602257.1%5,890 651449.6%7,959 651858.0%6,677 7011311.5%9,568 701489.4%7,827 758814.2%11,815 7511211.5%9,624 806817.7%14,766 808414.6%12,207 INCOME TARGET TABLES

12. 2. LIFESTYLE DECISIONS

13. LIFE AND DISABILITY INSURANCE

14. Risk LIFE AND DISABILITY INSURANCE

15. DEBT 209m 17yrs 4m 224m 18yrs 6m Scenario 1: Capital R1 000 000 Lifestyle Expenses R6 000/m Loan R100,000 R1 493/m Scenario 2: Capital R900 000 Lifestyle Expenses R6 000/m No Loan

16. Children Lifestyle Financial Portfolio NewCurrent Investment Insurance / Risk Debt 10090 110200TOTAL 0 70 25 15 0 10 0 0 SPENDING PLAN

17. 3. RETIREMENT INVESTMENT CHOICES

18. FINANCIAL PLANNING CLUB INVESTMENT VEHICLE vs. INVESTMENT STRATEGY

19. Investment vehicle Investment strategy

20. FINANCIAL PLANNING CLUB INVESTMENT VEHICLES

21. R.A. Pension Funds Provident Funds Endowment Cash Property Shares Unit Trusts Preservation Funds Retirement Funding Non-retirement funding Discretionary vs. Compulsory (pg. 60)

22. FINANCIAL PLANNING CLUB Some investment vehicles FROM which you might retire

23. FINANCIAL PLANNING CLUB DEFINED CONTRIBUTION PENSION FUND

24. Contributions You Company Defined Contribution Pension Fund Benefit RISK Market Value Income

25. Defined Contribution Pension Fund Pension (Different types) 2/3 Pension 1/3 Lump Sum Less tax

26. FINANCIAL PLANNING CLUB PROVIDENT FUND

27. Contributions Market Value You Company Provident Fund Benefit Income Tax deferred After Tax Money

28. Provident Fund 2/3 Pension Full Value Less tax Spend Income Tax efficient

29. Provident Fund Pension (Different types) 2/3 Pension Tax free Lump Sum Income Taxable

30. FINANCIAL PLANNING CLUB Investment vehicles TO which you might retire

31. Pension Fund Provident Fund Retirement Annuity Lump Sum Pension (Different types)

32. Pension (Different types) ? ? RIP Income Capital

33. vehicles TO which you might retire 5 Things to think about: 1.Preserve capital for heirs 2.Flexibility 3.Longevity 4.Responsibilities 5.Inflation

34. with profit annuity How it works  Provides you with an escalating pension for life  Guaranteed for life  Escalation in line with fund performance  Can be joint – with spouse –(can reduce at first dying spouse - higher starting income)

35. with profit annuity Advantages:  Income guaranteed for life  Increases could keep pace with inflation Disadvantages  Capital dies  Inflexible

36. with profit annuity Where appropriate:  No responsibilities beyond your life  Preserving capital NOT a priority  Longevity  Don’t need future flexibility  (Other than varying escalation)  High interest rates when retiring  Under-funded retirement –(basic predictable income)

37. living annuity How it works  Select an investment strategy  Real return required to support lifestyle  Consider the risk  Can change the investment strategy  Income 2,5% - 17,5% pa  Can reset the income each year

38. Advantages:  Capital is preserved  Flexible  Income  Investment strategy  Can move money to another company  Can move money to another type of pension  Investment strategy can outpace inflation over time  Get good advice living annuity Disadvantages  You can erode capital  Longevity risk  ALSO: Investment risk

39. living annuity Where appropriate:  Preserving capital is a priority  Need flexibility –  changing circumstances  uncertain future  High Inflation  Good investment strategy can outpace  Life shortening illness  You  Partner

41. 4. TAX BASICS IN RETIREMENT

42. INCOME TAX

43. Tax Free Below age 65 Above age 65 NIL Tax Low Tax Low Med Tax Med Tax High Tax High Tax

44. NIL Low Tax Med Tax High Tax Low Income Med. Income High Income

45. 40% 15% 20% 25% 30% 35% R100

46. MEDICAL EXPENSES

47. Medical Lower Income Higher Income

48. Medical Lower income Higher income

49. TAX AND INTEREST

50. Interest

51. HOW TAX IS CALCULATED

52. 40% 15%20%25% 30% 35% Pension 1 Pension 2 Work Annuity Interest 1 Interest 2 Interest 3 Medical Exempt interest

53. 40% 15%20%25% 30% 35% Pension 1 Pension 2 Work Annuity Interest 1 TAX

54. 15% Pension 1 40% 20%25% 30% 35% Pension 1 Pension 2 Work Annuity Prim. Rebate Age Rebate TAX Age Rebate Prim. Rebate TAX Threshold

56. duringdis-invest before TAX ON LUMP SUMS

57. Retirement Funds Income Taxable Income RA Pension Provident Taxable TAX ON LUMP SUMS

58. Income Lump Sum Tax Pension (Different types) RA Pension Provident

59. LUMP SUM Cash Tax Free Tax Lo Tax Med. Tax Hi RA Pension Provident

60. Above R900’00036% Next R300’000 27% Next R300’000 18% First R300’000 0% Lump SumTax R1,000,000R171,000 R900,000R135,000 R800,000R108,000 R700,000R81,000 R600,000R54,000 R500,000R36,000 R400,000R18,000 R300,000R0 R200,000R0 R100,000R0

61. dis-investbefore PREVISOULY DISALLOWED CONTRIBUTIONS

62. Cash Tax Free Lump sum Tax Low Tax Med. Tax High

63. Less tax R36’000 1/3 R500’000 2/3 R1’000’000 Discretionary investment R464’000 Living annuity (or similar) R1’000’000 Pension Fund R1’500’000 R1’464’000 Saving R36’000 1/3 R300’000 2/3 R1’200’000 Discretionary investment R300’000 Living annuity (or similar) R1’200’000 Pension Fund R1’500’000 Scenario 1 Scenario 2 HOW MUCH TO TAKE AS A LUMP SUM

64. Less tax R351’000 Discretionary investment R1’149’000 Provident Fund R1’500’000 R1’149’000 Saving R351’000 Tax free R300’000 Taxable R1’200’000 Discretionary investment R300’000 Living annuity (or similar) R1’200’000 Provident Fund R1’500’000 Scenario 1 Scenario 2 HOW MUCH TO TAKE AS A LUMP SUM

65. CASE STUDY Bob Jones Age 60 Provident fund R1’500’000 Lifestyle expenses R8’000/m

66. Age 85/86 Age 77/78 8 years Draw tax free portion only Draw Full lump sum CASE STUDY

67. Tax free R300’000 Taxable R1’200’000 Provident Fund R1’500’000 Less tax R351’000 Provident Fund R1’500’000 Discretionary investment R1’149’000 Fully Accessible Discretionary investment R300’000 No access Scenario 1 Scenario 2 Fully Accessible Living annuity (or similar) R1’200’000 TAX VS. liquidity

68. Low Liquidity Low TAXHigh TAX High Liquidity How much to draw as a lump sum?

69. SUMMARY 1: How the numbers work 2: Lifestyle choices 3: Investment choices 4: Tax basics

70. MONEY TALK @ RETIREMENT