True Story

iStockphoto: dimdimich

By Paul Leonard CFP®

Here is a true story of a happy 70 year old retiree whom we will call Fred.

Fred retired in 2004 at the age of 61 with R3million in his pension fund and asked my colleague Craig Kiggen (in KZN), who won the financial planner of the year award in 2006, to help him.

Fred invested into a living annuity. For a living annuity to work properly you need skillful planning upfront, appropriate implementation of the investment and, very critically, consistent ongoing reviews of the financial planning and investment strategy.

In 2013 Fred sent an email which said the following: I just received the latest Market Value Statement of my pension investment and I have a few comments:

I realized that I am no longer an engineer, but a retired farmer and my frame of reference changed substantially. Money to me now means “food on the table”

I invested approximately R 3 million in 2004. According to my investment statement my cumulative withdrawals up to September 2013 also amount to approximately R 3 million. However the investment statement shows that my portfolio value is almost R 5 million. (This includes a setback and recovery of Fred’s investment going through the 2008 recession).

Fred goes on to say: “When I retired my strategy would have been to put my money in a “bliktrommel” under the bed and to draw the amount that I needed each month from the “bliktrommel”.  If I had done that I would have been left with absolutely no money on 1 October 2013, which would have meant no food on the table.

It is unlikely that you will be able to achieve your lifestyle objectives if you do not get your money to work for you. That is what the financial planning profession is intended to do – help you to work out how to get your money to work for you, and then to get it working for you. This is a very heartening story of the benefits of the financial planning profession. As a result Fred says he is able to sleep peacefully at night because there will be food on tomorrow’s table.

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