Question

I retired three years ago, with half my income coming from my company pension fund and the other half from interest from investments. I am paying tax at a rate of 41%. Is there anything that I can do to reduce this amount?

Answer

Review your budget

We have had several interest rate increases over the past year. It may be a good idea to take stock of your expenses and see if you are living within your means. 

I would recommend that you go through your bank statements and update your monthly budget by listing all the items on which you are currently spending money. You can then use this to make the necessary adjustments if your expenses exceed your income. 

Sort out your important documents

It is important that your family knows where your will and any other important documents are. These would include copies of your ID, medical aid card and marriage certificate. 

Earlier in the year, I shared a copy of a life file template that lists the important documents that you should have handy should you or your spouse pass away. I’m more than happy to email you a copy if you contact me. 

Review your investments

We have been through a particularly turbulent year on the investment front. It is always a good idea to revisit your investment strategy and ensure that your portfolio is sufficiently diversified to reduce any unnecessary risks. 

One risk that is worth a close look is having all your assets physically domiciled in South Africa. It is relatively easy to move assets offshore. Once your money is offshore, you have a much wider range of investment choices open to you. 

Many financial experts recommend that you should have between 25% and 40% of your assets physically located outside the borders of South Africa.

Review your risk cover

Life happens and your personal circumstances change. We do not always check to see if the risk cover that we have is appropriate for our needs. This can result in us wasting money by paying premiums for cover that we do not need. 

The more dangerous option, however, is to have too little cover for our needs, which can result in you and your family getting into financial trouble should something unfortunate happen. 

There are two key risks to consider. You should check that you have structures in place to ensure that, should you be unable to work because of illness or disability, you will continue to receive an income until you retire. 

This is especially important for those who work for themselves. If you have multiple income streams, you need to make sure that all these streams are covered.

You should also check that your family will survive financially should you pass away. You should, at the very least, have life insurance in place to:

• Cover any debts;
• Replace your salaries until your last dependant finishes their studies; and
• Have about half a year’s income in order to cover any final expenses and incidentals.

A decent financial planner should have software programmes that can help you get an accurate idea of your needs.

Here’s to a new year of financial wellness.