If you’re a government employee thinking about retiring or resigning, one of the biggest challenges is trust. Who do you trust—not just to invest your money, but to help you save on tax, protect your legacy, and ensure you never run out of resources? Should you rely on the pension fund, investment houses, or take control of your money yourself?
The Challenge of Finding the Right Financial Planner
How can you know that your financial planner truly has your best interests at heart? This decision can feel daunting. But what if there’s a way to take control of your financial future without risking your hard-earned savings?
Last week, Susan, one of my clients, called to review her income plan. She’s been with me for a year now and said, “Devon, I’m so happy with my investment and its growth. The income is enough, and everything feels perfect.” I smiled and replied, “Susan, I’m glad to hear this. But what if it could be better?”
That’s what I want to focus on today: How can you ensure your resignation plan doesn’t just work but thrives? If you’re ready to take control of your money, protect your wealth, and save as much as possible in tax, this guide is for you. Let’s dive into five essential tips that could make all the difference.
1. Start Small and Test
Start small and test your financial plan. What does this mean? The goal is to achieve financial freedom—not just to retire or resign.
Why Starting Small is Important
Many government employees face challenges with trust. Maybe you or a family member have had a bad experience with a financial advisor, leading to losses. This can make you hesitant to trust someone with your hard-earned money.
To overcome this, consider:
- Testing your financial planner: Start with a small amount of money (e.g., R50,000 or R100,000) that you’ve saved in a bank account, investment, or retirement annuity.
- Evaluating results: Ask your planner to demonstrate tax-saving strategies, safe investment growth, and overall financial planning.
- Observing communication and clarity: Ensure they explain things simply and effectively.
This small investment helps you assess their trustworthiness and expertise without putting your entire financial future at risk.
2. Don’t Keep Too Much in the Bank
While having money in a bank account offers security and liquidity, keeping too much can cause problems.
Risks of Excess Bank Savings
- No beneficiaries: Money in a bank account becomes part of your estate, attracting:
- Estate duty (a tax on your estate when you pass away).
- Executor fees (percentage-based fees charged on the gross estate).
- Interest income: High savings can lead to excessive interest income, which is taxable and can increase your tax burden.
The Right Balance
- Emergency fund: Keep enough liquidity for emergencies.
- Avoid over-saving: Excess money in the bank can erode your financial efficiency due to taxes and fees.
3. Identify Tax-Saving Opportunities
Tax planning is crucial whether you choose to retire or resign. Many employees miss opportunities to minimize taxes on lump sums and income.
Tax-Saving Strategies
- Lump sums:
- Gratuities and one-third lump sums are taxable. Start planning early to reduce tax liability.
- If you started working before 1998, leverage the pre-1998 tax-free benefit to save significantly.
- Income planning:
- Ensure your monthly income is structured to minimize taxes.
Early planning ensures you maximize tax savings and avoid unnecessary financial stress.
4. Monthly Monitoring
Regular reviews are essential to track the performance of your investments and adapt to changes.
Benefits of Monthly Monitoring
- Transparency: Regular updates on your investments build trust and confidence.
- Market adaptability: Markets fluctuate, and monitoring ensures your plan stays on track.
- Proactive adjustments: Address issues promptly to maintain financial goals.
While monthly reviews don’t require frequent meetings, they provide insights into how well your plan is performing and whether adjustments are necessary.
5. Stay in Touch with Your Financial Planner
Life and laws change, and your financial plan should evolve with them.
Why Staying Connected is Critical
- Tax law changes: Tax laws are updated annually, and your plan needs to reflect these changes.
- Personal changes: Your family or financial situation might shift, requiring plan adjustments.
- Continuous optimization: Regular check-ins ensure your plan remains aligned with your goals.
Your financial planner’s role is to help you navigate these changes and keep your strategy relevant.
Conclusion
By starting small, avoiding excess bank savings, focusing on tax-saving opportunities, monitoring regularly, and staying connected with your planner, you can ensure that your resignation plan doesn’t just work—it thrives.
Comment below and let me know which of these tips resonates with you the most. Together, we can build a future that aligns with your goals.
Retirement Wellness SA is an Authorised Financial Services Provider – FSP 31609. This video provides information, not advice.
Disclaimer: This information is not provided by or on behalf of the Government Employees Pension Fund (GEPF). We do not act on behalf of the GEPF.
