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Retirement Gap Forecaster
This calculator is part of Momentum's ongoing support to financial advisers.
It does not constitute advice by Momentum to your client and
may be used only on condition that you verify and endorse
its contents as your personal advice.
Every care has been taken to ensure accuracy and legal correctness,
but this is not guaranteed. The responsibility to verify the
validity hereof rests on the user.
Copyright exists in this material and it may not be copied or duplicated in any manner.
Please note that most of the calculations are based on unique features of Momentum
products. The results may be invalid if applied to products of other insurers, which
will compromise your recommendations to your client.
I accept the conditions of use
Retirement Gap Forecaster
The Retirement Gap Forecaster provides illustrations on the present value of
all types of retirement capital
By various scenario settings, it assists in determining future contribution levels,
a realistic retirement date and income levels after retirement
Client
Gender Male
Financial Adviser
Date of report 16-Oct-2011
Date = today
Retirement Gap Forecaster
Personal detail Assumptions
Current age 30 Income and capital needs at retirement
Retirement age 55 Capital needs and debt None
Monthly income R0 Monthly income R0
Current provision Income required to age 90
Company retirement fund R0 New provision
Current contributions R0 New lump-sum R0
RA+Endowment+Recurring R0 Recommendation: New monthly investment
Current contributions R0 Implemented: New monthly investment
Other provisions R0 Contribution increases 8.0%
Preservation fund R0 Fund growth of this new provision 10.0%
Capital build-up to retirement Utilisation of capital after retirement
0
55 60 65 70 75 80 85 90
30 35 40 45 50
New Provision Preservation Other Recurring Employer Outflows Capital: Implemented Capital: Recommended
Capital at retirement date R0 Your life expectancy after retirement is 22.00 years,
Present value of retirement capital R0 which is equivalent to attaining the age of 77 years.
Notes
Retirement annuity and endowment split
0
The purpose of this section is to determine the most tax-efficient investment vehicle.
Your maximum tax-deductible contribution to a Retirement Annuity is the greatest of the
following three amounts:
1. R1 750 or
2. R3 500 less allowable Pension Fund contributions, being : R 3,500 minus R0
= R 3,500 or
3. 15% of taxable non-retirement funding income, being : R0 X 15%
= R0
Your maximum tax-deductible contribution to a Retirement Annuity is then R 3,500 per year.
At the moment your contribution to all Retirement Annuities is R0 per annum.
It follows that the maximum additional contribution allowed is R 3,500 p.a. , or R 292 per month.
Proposals based on the calculator results
The calculator result proposes the following investment contributions:
Single investment R0
Recurring monthly investment R0 with a 8.00% annual increase.
Given this result and your overall tax position, it is proposed that the investments be structured as follows:
Monthly Retirement Annuity R0
Monthly Endowment R0
= Total monthly contribution of R 0 according to the calculator.
Single Retirement Annuity R0
Single Endowment R0
= Total single contribution of R 0 according to the calculator.
Please refer to the enclosed assumptions on which all calculations are based.
0 0 16-Oct-11
Other retirement provisions
Assets that will be liquidated at retirement (or that could be
liquidated) and then invested to generate income.
Current Value Growth
Fixed property
Listed shares
Business interests
Family trust
Other
Other
TOTAL R0
Notes
RAs, endowments and other investments
Investments that will provide retirement income
Current Annual Monthly
Retirement Annuities value update contribution
Contract 1
Endowments
Contract 1
Unit trusts
Contract 1
Cash investments
Contract 1
TOTAL R0 R0
Notes
These are all investments that is part of your retirement planning.
Your investments for other purposes, such as education or short term goals, are not included in these calculation.
Monthly income
Please provide detail of these sources of income
Gross retirement funding income / fund salary (before tax)
Non-retirement funding income (taxable)
Total R0
Notes
Retirement Planning:
Introduction
Most of us dream about our retirement and how we will have time to do the things that we do not
have time for during our working lives. However, most people will not realise their dreams, simply
because they will not be able afford to do so. In South Africa, less than 10% of people are able to
retire financially independent. The adage of 'Failing to plan is planning to fail' is most applicable to
this area of finacial planning. The sucess of a retirement plan is largely dependent on how early in
your life you start doing something about it.
This analysis will assist you in determining a suitable retirement age and setting realistic income
objectives. It aims at ensuring that you are able to maintain that standard of living throughout your
retirement.
This advice process concludes with the recommendation of certain solutions as an integral part of
your retirement strategy.
Current situation
Today, at the age of 30, you intend to retire at age 55. Your current monthly taxable income is R0
and you plan to live on R0 a month after retirement to cover your general living and medical
expenses. There is R0 for general expenses that will increase by 8% a year. There is no provision
for medical expenses.
At retirement and during the years thereafter, you might need capital for various one-off or
recurring purchases. Your needs, expressed in present value terms, are as follows:
Capital needed for Current cost At age Interval Last spend
Need1 None
0 None
0 None
0 None
0 None
0 None
At retirement, or during the years thereafter, there might be some debt to settle. Your position in
respect of these general debts will be as follows:
Debt type Current balance Remaining At age
balance
Bond: residential property None
Bond: Other None
Lease None
Hire Purchase None
Personal loan None
Credit card None
Existing and future retirement provisions
At the moment your existing retirement provisions may be summarised as follows:
Approved funds and recurring investments:
Monthly
Current value Annual increase
investment
Employer's retirement fund R0 None Salary %
Retirement annuities None
Endowments None
Unit trusts None
Cash None
Please note that it is an important condition that you must maintain all these provisions up to your
retirement date and not use it for any purpose other than your retirement.
Assets to be liquidated at retirement:
Current value
Fixed property: None
Listed shares: None
Business interests: None
Family trust: None
Other: None
Other: None
Preservation funds
You have no preservation funds (withdrawal benefits from previous employers).
Apart from your investment income, there are other possible income sources after retirement. Your
situation is as follows:
Post-retirement employment: None
Rental from fixed property: None
Other source: None
Reduction of income needs in future:
To preserve your retirement capital, an additional strategy is to draw your stated level of income in
the beginning years of retirement, but reduce it after a number of years. For the purposes of this
analysis, you have opted not to do so.
These existing provisions are projected to provide a capital base of R0 at retirement. This may be
graphically illustrated as follows:
Capital build-up to retirement
30 35 40 45 50
New Provision Preservation Other Recurring Employer
Recommendation
At your retirement at age 55 you have a life expectancy of 22 years. This is merely a guideline and
refers to the population in general terms. Your goal is to provide retirement income and capital to
age 90.
Considering your current situation and with your personal preferences in mind, you should not
make a new recurring investment right now. You will not make a single-premium investment.
Result
We illustrate your final retirement position below. In the graph, the blue line indicates the capital
balance that you will have, if you decide to implement our savings recommendation. The grey bars
indicate the capital balance of the savings that you implemented. The red bars indicate outflows
from capital, consisting of needs for daily living and capital expenditure.
In short, at the ages where the grey graph (the savings you implemented) shows a positive
balance, you are on target in terms of access to capital as well as for your desired standard of living
of R0 a month in present buying-power-terms.
At the ages where the grey graph shows no positive capital balance, you are below target in terms
of access to capital and your desired standard of living.
Utilisation of capital after retirement
55 60 65 70 75 80 85 90
Capital: Implemented Outflows
Retirement planning assumptions
As with any calculation, the outcome of this analysis relies on the accuracy of these assumptions
that we make:
Consumer Price Index (CPI) of 8% per year.
During your working life, your income is expected to increase by 9% per year.
Annual growth rates of the following investment types assumed at:
Employer retirement fund: 10%
Retirement annuities: 11%
Endowments: 11%
Unit trusts: 11%
Cash: 8%
Preservation funds: 10%
Fixed property: 0%
Listed shares: 0%
Business interests: 0%
Family trust: 0%
Other: 0%
Other: 0%
Return on capital base invested after retirement: 10%
New retirement provision made today: 10% growth a year. Any new recurring monthly investment will increase annually by
8%.
It is further assumed that all products that you agree to buy today, will continue to provide their tax benefits and other
structures as they do at the moment.
Conclusion
At our meeting to discuss this analysis, we will make any changes that you might want to make to
our recommendation before implementing it.
It is important to monitor the progress of every financial strategy to ensure that it comes to a
successful conclusion. We will therefore determine future revision dates that are convenient to you.
0 16 October 2011 0
Income and economic activity after retirement
Income needs after retirement
General needs R 0 increasing by 8.0% per year (CPI is set at 8.0% pa)
Medical aid increasing by per year
Total income requirement R0 (This is #DIV/0! of your current gross income)
Other sources of income after retirement
Post-retirement employment earned for years and increasing by per year
Rental from fixed property
Other source
Total R0
Reduction of income needs after retirement
Income requirement will be reduced by per month years after retirement
Notes
Capital needs and settlement of debt
Expenses and purchases
Retirement age:
Last expense at Cost of initial
55 Current price Required at age Repeat interval
age expense
0
Need1 R0
R0
R0
R0
R0
R0
5 55
Settlement of debt
Current Interest Term Balance
Settled at begin
balance rate to end of in year when
of retirement yr
contract settled
Bond: residential property R0
Bond: Other R0
Lease R0
Hire Purchase R0
Personal loan R0
Credit card R0
R0
Notes
Company retirement fund
Defined contribution fund
Current Contributions
value
Employer Member
Current value / contributions R0 0.0% 0.0%
OR OR
R0 R0
per month per month
OR
Years' membership to date 0
Pension benefit is equal to 0.0% of final salary for every 0 year's service
Annual pension increases 0.0%
OR
Years' membership to date 0
Annual pension increases 0.0%
Notes
Preservation funds
Please supply the current fund values Utilisation of capital after retirement
Current
value
Contract 1
Total R0
It is important to preserve withdrawal benefits
from approved funds. The graph illustrates
the negative impact that any premature usage
of these benefits have on your standard of
living after retirement.
55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89
Withdrawal amount R0
Income Required Capital Balance
Fund balance R0
Notes
Options available upon receipt of a withdrawal benefit
Take cash benefit: R1 800 tax-free, pay tax of approximately
-R 324 on the selected withdrawal benefit of R0
at an average tax rate of 18.00%
Transfer full or part benefit to the retirement fund of the new
employer, no tax today, benefit at normal retirement age
Transfer full or part benefit to
Retirement Annuity, no tax
today, benefit at age 55
Transfer full or part benefit to a
Preservation Fund, no tax today,
benefit at any time
Date of withdrawal
55 60 63
Notes
Assumptions
Growth of company fund 10.0%
Growth of Retirement Annuities 11.0%
Growth of Endowments 11.0%
Growth of Unit Trusts 11.0%
Growth of cash investments 8.0%
Growth of preservation fund 10.0%
Expected salary increases 9.0%
Consumer price index 8.0%
Return on capital after retirement 10.0%
Notes
All these assumptions are extremely important to the outcome of this planning session.
None of these are based on any certainty and are therefore never guaranteed (except where guaranteed products are used).
All calculations are made on a pure mathematical basis, using the assumptions, and should be compared to and confirmed by an official
quotation from Momentum, which is done on a different basis.
It is of utmost importance that you check and confirm each assumption now and ensure that we discuss this issue on an ongoing basis,
as they need to be adjusted regularly.
