Author: Sanlam WealthsmithsTM
Author: Glacier by Sanlam
Roenica Tyson: Product Manager at Glacier by Sanlam
Rocco Carr: Business Development Manager at Glacier by Sanlam
It’s important not to make hasty decisions based on fear. Switching to a lower risk portfolio can lead to ‘locking in losses’. Remember, cashing in at a low point makes a paper loss a real loss.
If you have a retirement savings plan and you are invested in a lifetime investment option, your money is moved from high-risk portfolios to lower-risk portfolios six years before your normal retirement date. Lower-risk portfolios have less equity exposure, which reduces the impact of the falling markets. The lifetime investment option is constructed using reliable investment principles, based on a long-term investment approach.
Whatever is happening in the markets, you need an investment strategy that’s aligned with your goals, your appetite for risk, and how long you have until you hope to retire. These are all personal and unique to you. The best way to plan for this, review this and to deal with uncertainty is through proper financial planning, together with patience and persistence with your investment strategy.
Making emotional decisions, based on short-term market fluctuations, may result in more harm than good and destroy the long-term value to your savings.
Please consult with a financial adviser before you take any action regarding your savings and investments.
If you’re invested in market-linked portfolios
Over the short term, you’ll probably experience negative returns. But don’t panic: history shows that markets recover over the medium to long term. History has also taught us that, in time, there will be recovery in the financial markets.
If you’re invested in retirement funds
Retirement fund portfolios are spread across various asset classes, such as bonds, property, cash and international assets, to reduce underlying risk. Your retirement savings are also protected (but not guaranteed) by the limitations of exposure to asset classes enforced by Regulation 28 of the Pension Funds Act. This helps by diversifying your portfolio. The most important Regulation 28 asset class limits are as follows:
*As prescribed by the South African Reserve Bank.
If you’re invested in a lifetime investment option, your monies are gradually moved from high-risk portfolios to lower-risk portfolios as from 6 years before your normal retirement date. Lower-risk portfolios have less equity exposure, which reduces the impact of the falling markets.
Please consult with a financial planner before you take any action regarding your savings and investments
One of the options that you can discuss with your financial planner is to leave your retirement savings until such time that the markets have recovered and you are ready to buy a pension. This means you postpone the payment of your retirement benefit in order to try to leverage from any gains when the market recovers. It may be a wise move to make, but remember: no one can accurately predict when the markets will recover. Other options could include taking a partial retirement only, or adopting a product strategy at retirement with your financial planner. You’ll need to weigh up the pros, cons and risks with a financial planner based on your specific needs.
By investing a lump sum or some of your salary each month, you can grow your money over time so that you can retire comfortably. No matter how much you need to or can afford to save, the most important thing is to stay committed to saving.
If you are retrenched or move jobs, you can maintain your retirement plan by moving it into a preservation fund. Resist the temptation to cash in your savings, as it will be very hard to make up for the value you’ll lose.
If you are retiring soon or are already retired, you need to draw a monthly income from your savings to maintain your lifestyle. You also need to manage your retirement savings to ensure it lasts throughout retirement.