The world is changing so quickly that talking about the pace of change is starting to feel a bit clichéd. We measure optimisation and innovation by software updates, not generations. This allows us to customise our lives to a great degree.

From time to time we need to check whether rules of thumb of previous generations still apply to the world as it looks at the moment. Most of the time, large systems and institutions struggle to keep up with how quickly the world changes. One improvement often allows for improvements in other fields.

In this episode we continue to discuss how we can think differently about retirement. We talk about why it’s important to shift our focus from retirement age to financial independence. We also dream about different ways to think about tax.

If you’re new, this episode might feel a bit too hardcore for you. Feel free to start with one that’s more relatable. We just couldn’t help ourselves.

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Win of the week: Slade

Imagine SARS offered a scheme whereby a taxpayer could invest as much money as they wanted into the markets and enjoy all the profits and dividends tax free, but upon death all remaining assets would be left to SARS?    

Of course there would be finer details to work out like:

Does it all go to the remaining spouse until their death then to SARS?

Or 50% to SARS and 50% to remaining spouse?

For those without children or suitable heirs, it would be a great option to unlock the value in the assets that we inevitably can’t take with us.  

Stephen

I want to minimise the drawdown on equities during a recession. My question is, how best could this be tackled? Would I need two Living Annuities or are there products out there that would do this for me? I know I could opt for the ABSA Volatility ETFs but I want the pure offshore exposure.

John

When you invest in an RA, you are really buying a pension.

I know you can take up to one third in cash BUT with the other two thirds, you still have to buy a pension! At what point over the age of 55 do you take your pension.

I suggest when your payout equates to R195,850 p.a (before tax) or R16,320 per month (before tax). After tax is becomes R13,385 per month. One (under 65 years) can earn up to R75,750 and not pay tax, but above this amount one pays tax at the rate of 18% up to R195,750.

Above this amount the next tax bracket is 26% (way too high).

If you are under 55, monitor the tax tables to find the revised numbers for when you reach 55. If you own a pension you will pay tax so keep the tax as low as possible.

Have enough cash to give you R23,800 interest per year, because that's the amount of tax-free interest you can earn.

At this point you have a virtually certain monthly salary of R15,365 after tax. ( R13,385+R1,980)

If your dividend yield is 2.4% after tax you earn R2,000 per month for every R1m invested.

For CGT - If like Simon you are not going to leave anything behind, cash in R40,000 p.a or another R3,330 per month.  Hey! now if you need even more money your CGT is around 11%.

TFSA - the last place to fleece money and it's tax free.

It is as important to have a budget and know and control your spending as it is to invest. When amounts from points 1-5 exceed expenses, financial independence happens. ( If you are cautious add an extra 25%)

Lastly, when you reach FI you don't have to RE but you do have the choice on what to do.

Santosh

I finally scheduled a meeting with 10X, following your show's continual compliments on their products, fees and market approach.

I had expected a "hard sell", but was pleasantly surprised when the consensus was "stick with what you're doing, no need to move".

This shows true integrity from both the advisor and 10X. While we are not doing business currently, it has given me the confidence to keep 10X as one of my top two choices if ever the need to appoint a product and service provider in the future.

Bonolo

I live with my parents and I am a field worker. They live in the townships of Pretoria north and I work in Pretoria East, Centurion and Mpumalanga (once a month).

1. I had an original plan of saving up the money I have left and the incentives I get quarterly in a money market fund until I am 30 years old. I’ve estimated that I'll be able to buy a townhouse cash or at least have 70%-80% deposit. I work in a very high stress job and unstable in terms of employment, so that's why don't see myself paying for a house longer than five years.
2. I could rent but I am also a firm follower of retiring early so I MUST have a home when the time to retire (early) comes and renting doesn't satisfy that part of the plan.
3. I also wanna chuck the money I have left over in index funds and figure my shit out when I am 30, but I don't want to feel like I am watching paint dry. I know there will be a time I'll certainly break because it would feel like I am doing nothing with my life. Also, I don't think I want to live with my folks (they are really cool roomies) that long.

Do you think I can retire on just my provident and tfsa at age 45? Should I focus the money I have left over on getting shelter and invest the extra money after sorting out a fully paid shelter?