Question

One in ten South Africans will live to age 100 so if you retire at 65, your savings may need to support you for another 35 years.

Over the past 35 years you lived through times of high inflation, low inflation, recessions, stock market booms, and political shifts. While you were working, salary increases and career growth helped you weather these challenges. In retirement, however, your investment savings must do all the heavy lifting.

Here are ten practical tips to help your finances go the distance.

Answer

1. Get specialist advice when you retire

Retirement involves major financial decisions: how much of a lump sum to take, how to structure your pension, and where to invest. Each choice has tax implications and long-term consequences.

This is not the time to do it yourself. A qualified financial planner can help you structure your income to last and avoid unnecessary taxes using the right tools and simulations.

2. Draw up a budget

Understanding your monthly expenses is essential in retirement. Be sure to include occasional costs like travel to visit children or holiday getaways. Once you have a clear picture of what you need each month, you can manage your income withdrawals more accurately.  This will ensure that your investments are aligned with your lifestyle needs and are structured for tax efficiency.

3. Understand investment timeframes and risk

Many retirees play it too safe with their investments. While capital preservation is important, being overly conservative can erode your buying power over time. Your income needs to grow faster than inflation, fees, and withdrawals.

A helpful strategy is the three-bucket approach:

By being able to isolate the investment strategy for each timeframe, I find that retired people don’t panic when the market falls

4. Beware of inflation

One of the biggest expenses in retirement are medical ones and the costs tends to rise faster than your pension. Over time, this becomes a major strain.

Consider building a separate investment or retirement annuity that’s earmarked to supplement these premiums in your later retirement years.

5. Use Retirement Annuities (RAs) Strategically

You can still invest in retirement annuities even after you’ve retired. Up to 27.5% of your taxable income can go into an RA annually, giving you a tax deduction.

Many retirees contribute to an RA in January and receive a welcome tax refund later in the year when SARS does their assessments. RAs offer tax-free growth and can later supplement your income (or future medical costs). Under the two-pot system, you can even access a third of your contributions if needed— you just repay the initial tax benefit.

6. Consider getting critical illness cover

There is a very good chance that you will become ill with something serious during the course of your retirement. No matter how good your medical aid is, there will be additional costs that have to come out of your own pocket.  These would typically be follow-up visits, x-rays and non-chronic medication. 

If you are on a tight pensioner budget, these costs can cause serious financial hardship.  A solution is to take out a critical illness policy that will pay out a lump sum of money to you if you are diagnosed with a serious disease. 

7. Reexamine your life cover

We typically take out life insurance to cover any debt or to ensure that our families are going to be okay if the monthly salary  no longer comes in. When you retire, your debt levels should be negligible and your salary will be the pension you’re getting so there’s no need to insure it. 

I often come across many retired people who have life insurance where the premiums are increasing at an alarming rate.  This is usually around 13% a year, which means that every six years, the premium doubles.  This eventually becomes unaffordable.

So, unless you are keeping the life insurance to ensure a measure of liquidity in your estate or you want it for an inheritance for your children you should seriously consider the merits of keeping it.

8. Structure your offshore assets correctly

Holding offshore assets is a great way to diversify your investments by reducing the risk of having all your assets in one country. It is also nice to have access to funds when you go and visit any children that may be overseas.

However, you need to understand the tax and inheritance implications of these offshore assets should you die. The combination of inheritance tax, probate and legal fees could see you losing up to half the value of these investments, not to mention the added time it will take to finalise your estate.

An approach that I favour is to move these assets into an offshore structure line an endowment or sinking fund. The advantage here is that they will not trigger offshore inheritance tax and you will not need a grant of probate for your heirs to inherit.

9. Manage your cash flow cleverly

You can make your retirement savings last a lot longer by ensuring that the income don’t you draw is structured correctly.

Your annuity income, rental income and interest will be taxed according to the income tax tables. This is not the case with discretionary investments like unit trusts or an investment portfolio.  If  you  draw a regular income from these investments, tThe bulk of this income will be seen as a capital withdrawal and that part of the income that is attributed to growth will trigger only capital gains tax  which comes in at 40% of your normal tax rate.

10. Structure your investments with inheritance in mind

The reality is that each of us will pass away at some point. You need to give some thought to the way you structure any inheritance.

• You need to ensure that there is sufficient cash flow for your surviving spouse to live on while the estate gets wrapped up.
• You should understand the costs involved in executing your will. For instance, if you leave assets to someone other than your spouse, estate duty and capital gains tax may become payable immediately—these costs cannot be deferred until the second spouse passes away. Assets like your family home may need to be sold to pay these taxes if you do not have other liquid assets.

Retirement isn’t a once-off event—it’s a third of your life that requires careful financial stewardship. By making strategic decisions around investments, tax, healthcare, and estate planning, you can improve both your income sustainability and peace of mind.

It is never too late to fine-tune your plan.