A sensible and sustainable draw-down strategy in retirement by Tracy Jensen
21
A sensible and sustainable drawdown strategy in retirement Tracy Jensen, 10X Investments
-
Upload
10x-investments -
Category
Economy & Finance
-
view
430 -
download
1
description
Tracy Jensen, Chief Product Actuary, 10X Investments presented at the 10X Retirement Conference 2014 on the topic A sensible and sustainable draw-down strategy in retirement.
Transcript of A sensible and sustainable draw-down strategy in retirement by Tracy Jensen
A sensible and sustainable drawdown strategy in retirement
Tracy Jensen, 10X Investments
What matters?
Pre-retirement
Transition into retirement
Retirement
National Treasury
Preparing your members for retirement
Tools
Income:
Term:
Inflation:
Flexibility:
Estate:
Retirement goals
65 year old male with R1m
Income: R4,200 pm (5%)
Term: Age 65 to 90
Inflation: Yes
Flexibility: Yes
Estate: Yes
Retirement goals: personalised
65 year old male with R1m
What influences your retirement goals?
65 year old male with R1m
What influences your retirement goals?
Products to meet your goal
Guaranteed annuity = insurance product
Income lasts for life but no estate* or flexibility
Living annuity = ‘investment’ product
You select income & investment but may not last for life. Provides flexibility &
possibility of estate.
Cash
*May be a guarantee period during which income is received regardless
Overview of products
Guaranteed annuity
(inflation-linked)Living annuity
Affordability
Longevity
Inflation
Flexibility
Estate
Living annuity
Income 2.5% to 17.5% pa
Fees Investment (consider term)
Term
Results
Income grows with inflationResults shown after inflationReturns from 1900 to 2013
Investments: Low equityMedium equityHigh equity
Fees (incl. VAT): 10X maximum 0.86% pa (R720 pm)Industry 2.85% pa (R2,400 pm)Industry fee comprises: Advice (0.75%), Administration
(0.25%), Investment management fee (1.5%), VAT (0.35%)
Living annuity: investments (fee of 0.86% pa)
65
67
69
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
10X retirement income in today's money: average markets
Low Equity Medium Equity High Equity
Age
Mo
nth
ly i
nco
me
afte
r in
flat
ion
84
Living annuity: investments (fee of 0.86% pa)
65
67
69
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
10X retirement income in today's money: average markets
Low Equity Medium Equity High Equity
Age
Mo
nth
ly i
nco
me
afte
r in
flat
ion
9584
Living annuity: investments (fee of 0.86% pa)
65
67
69
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
10X retirement income in today's money: average markets
Low Equity Medium Equity High Equity
Age
Mo
nth
ly i
nco
me
afte
r in
flat
ion
>1009584
Living annuity: poor returns (fee of 0.86% pa)
65
67
69
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
10X retirement income in today's money: poor markets (worst 1 in 4)
Low Equity Medium Equity High Equity
Age
Mo
nth
ly i
nco
me
afte
r in
flat
ion
908279
Living annuity: high fees (fee of 2.85% pa)
65
67
69
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Industry retirement income in today's money: average markets
Low Equity Medium Equity High Equity
Age
Mo
nth
ly i
nco
me
afte
r in
flat
ion
898279
Living annuity: impact of fees/poor returns
Investment 10X(Fee of 0.86% pa)
Industry(Fee of 2.85% pa)
Years of extra income with 10X*
Low equity 84 79 5
Medium equity 95 82 13
High equity >100 89 24
*Based on projected values
Impact of high fees = Impact of poor returns
How do I reach my goal?
Goal = Income R4,200 pm from age 65 to 90, growing with inflation
Average markets: medium/high equity & low feesPoor markets: high equity & low feesWith high fees you never reach your goal in average or poor markets*
*Based on projected values
Summary*
You’ll reach 5% income goal with: Low fees ANDMedium or high equity
portfolio
High fees = 5 to 24 years less income Equivalent to poor returns*Based on projected values
Thank you
