IN THIS ISSUE:

5 steps to a cash-rich retirement.

So whats the perfect mix? Well show you.

What keeps you up at night?

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One in five South Africans believe theyll never be able to retire at all.

The reason?

They just havent saved enough.

Even more frightening is the fact that 90% of those who are saving will find their retirement nest egg only generates 50% of their current income in retirement.

At that rate, a R300,000 annual income drops to just R171,000 a year.

Whether youre just starting out or have already transitioned to a fixed income, today Global Investment Director of The South African Investor joins us to show you what it takes to never run out of money.

35 steps to a cash-rich retirement

by Alexander Green

Want to retire rich?

Or, at the very least, in the comfort youve become accustomed to?

Its easier than you think

Just follow this five step cash-rich retirement plan:

Cash-rich retirement step 1: Devise a plan

First, you need to know what youre up against. Take a look at how much youve already saved. This will help you determine how much more you need And when youll need it.

To maintain your standard of living, youll want to generate 70%-85% of your current income in retirement.

But if you want European vacations, ski trips to Austria and money to spend on the grand kids, youll need to aim a bit higher. Then you need 125% of your current income to enhance your lifestyle in your golden years.

Be sure to factor in the following:

Spending habits (track them for six months or a year to really know them)

Inflation

Expenses thatll be eliminated when you retire and those thatll arise

Cost of health insurance

All of your income sources, including your pension

Now that youve come up with what you need to save for retirement, heres how to reach your goal

Cash-rich retirement step 2: Save aggressively

Save, save, save Even if it means lifting up the couch pillows and finding spare change. You need to save aggressively.

Truth is, the #1 factor determining if youll run out of money or not in retirement is how much you stash away now. If youre not on par with what experts recommend, you could be in trouble.

Saving even an additional R20 a week very possible for most can hand you thousands you would have otherwise never seen

Number of Years Saving R20 a Week 5% Average Return 10% Average Return

10 R13,700 R18,200

20 R36,100 R65,500

30 R72,600 R188,200

Where you stash your money is important, too

Cash-rich retirement step 3: Protect your nest egg with bulletproof asset allocation

Whether its in your RA or a brokerage account, youll want to diversify your holdings.

Its your asset allocation you should pay particular attention to how you spread your investments across different asset classes. Specifically shares, bonds, real estate, cash and precious metals.

By investing in a variety of assets, you position yourself to gain while protecting yourself with diversity. If one asset class is doing poorly, another is likely to do well and can improve your overall return.

I want to tell you the true story of J Brits from Bronkhorstspruit, who earned R422,800 in 4 months.

He had nothing going for him

No fancy education.

No friends in high places.

Just this one simple tool.

And now its available to you.

So whats the perfect mix?

I recommend the following asset allocation model. Its the ideal blend of share, bonds, precious metals and real estate Based on Harold Markowitzs Nobel Prize-winning investment philosophy.

In short, you want your retirement assets to be around as long as you are. Following this model can improve your odds. Just be sure to rebalance your holdings every year, bringing each allocation back in line.

Cash-rich retirement step 4: Eradicate debt And turn the tables on interest

Shockingly, statistics show the 85% of all South Africans owe more than they earn. Its time to turn the tables on interest Consider what adding some pocket change to your monthly payment can do. As little as R10 a day can save you thousands of rands in interest And shave off years of repayment

If, for example, you have a 20-year bond of R500,000 at an interest rate of 12.5% and you increase your bond repayment by just R300 a month (or R10 extra a day), you could pay off your bond almost four years earlier and save more than R200,000 in interest

Start by paying off your unsecured, high-interest credit card debt first. Then tackle secured debt, like your bond and car loan.

Making a 13th bond payment every year can help pay off your home sooner and you pay less interest overall.

Cash-rich retirement step 5: Keep investment fees down

Dont give your hard-earned money away to brokerages in the form of fees.

Small fees add up.

Without fees, a R100,000 portfolio earning 10% a year grows to R11.7 million after 50 years. Add in a 1% fee and your total value melts to just R4.6 million. (Only R794,000 of that difference is actually fees. The rest comes from the lost gains associated with those fees compounded over time.)

So dont jump in and out of the market during bouts of volatilty. Invest for the long-term and its sure to pay off.

Until next week,

Heres to your financial freedom,

Karin Iten and Alexander Green