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.
Pages to are hidden for
"GAP"Please download to view full document