RA and Medical Aid

[craigdoepie]

Hi Guys,

It is time for me to start investing in an RA, but I am not sure on which route to go. I know what an RA is, but if someone can perhaps give me advice on which company to acquire the services from.

And 2ndly, which Medical Aid would you guys recommend. I am currently leaning towards Fedhealth, because from what I heard and read they are quite good and don't give too many hassles. Butyou guys out there can maybe point me in a better direction I would really appreciate it. I don't get sick much, so don't need exquisite cover, just basic cover.

Thanks in advance for you guys assistance.

[Mike Hoxbig]

I have a RA and investment portfolio with Liberty Life, and another investment portfolio with Stanlib. In 7 years I'll be collecting a fairly decent sum when the investment portfolios mature :) No hassles so far.

[lerouc]

I have an RA which i am not too happy about because as far as I know you can't touch the money until your like 55 or something. I am with Discovery for medical just because of the benefits you get with Vitality.

[Mbuzi]

Hi Guys,

It is time for me to start investing in an RA, but I am not sure on which route to go. I know what an RA is, but if someone can perhaps give me advice on which company to acquire the services from.

And 2ndly, which Medical Aid would you guys recommend. I am currently leaning towards Fedhealth, because from what I heard and read they are quite good and don't give too many hassles. Butyou guys out there can maybe point me in a better direction I would really appreciate it. I don't get sick much, so don't need exquisite cover, just basic cover.

Thanks in advance for you guys assistance.

RAs are great product to invest in with just one disadvantage that you can't withdraw before a particular age. What I have done is invest as little as possible on a RA with OM and then invest another amount on one ETF product to also supplement my RA. With the ETF I can get the maximum returns as I can see which products are performing at a particular time and then buy them and thereby growing my savings for retirement. IMO- As for the medical aid, no comment.

[superskully]

There are catches to RA and i personally dont beleive in them.
If you already have a pension fund elsewhere - then the tax break of the RA is null, as when you retire you can only take 1 portion (thinks it like 315k) now as tax free.
Also check the admin fees and incentive targets, some guys, like PPS, take like >10% of yr monthly contribution with small incetive targets and u can never recover that %.
Rather have someone that that takes fees of yr incentive targets - so its an incentive.

[etwylite]

An "RA" is merely a tax wrapper for an underlying investment. Yes you can not withdraw until at least 55 also unlike company pensions its inaccessible when you change jobs etc.

The underlying investment is what you need to understand. Previously RA was the preserve of big insurance companies OM Sanlam, liberty etc. These are all broker sold with added comm which reduce your actual amount invested. Also most had big property investment exposure (think regional shopping centres etc)

These days RAs are avaible from investment houses ie Allan Gray, Coronation etc. These have equity exposure in various balances and you can select a risk profile. Also you can buy direct from them cutting out broker comm.

dont get caught with built in increases. ie 5 or 10% annual premium escalation unless you want.

I take a minimum and then boost my payment in Feb when i know my income for the year and can work out a topup to make the most of the 15% tax allowance.

Do your homework 1 RA is not like another.

[ice_cubes]

medical aid depends on the reason u want it...u want medical aid 4 compliance purposes? (work requires u 2 have one so u'll just go get cheapest) OR u want one because of the type of cover u want?....
if u want cheapest, get medihelp necesse option..u want something more viable,,,shop around...no company is better than the next..its all about the extra benefits they give over & above the med aid service...if its 100% hospital cover, then its 100% 4 all of them...so ya good luck!

[bumblebee]

With RAs look at the cost of the RA 'wrapper', as you pay that in addition to the cost of the underlying funds. The life insurance companies tend to be expensive and the investment houses less so, but look carefully at all the costs of each one.

Remember that percentage costs you pay per year compound to increase your total cost over the full period. Understand this and its impact before signing anything. This is the biggest reason never to allow a financial adviser to set an annual percentage fee. Pay once off for their expertise just like you would another professional like a doctor or lawyer.

[Freshy-ZN]

There seems to be a lot of confusion and misunderstanding when it comes to RAs. Saying you are not happy because you cant touch your money until age 55 means you werent explained this and/or you have the wrong solution (@lerouc). An RA is a RETIREMENT Annuity and is designed to save for retirement. There are many benefits to having one but like all things in life it may not be the ideal solution for everyone. Other retirement savings platforms are pension and provident funds for example. Many people have both an RA and a Pension fund, others have one or the other or nothing at all. Is saving specifically for retirement a good idea? In general terms it has to be. The stats for people who havent planned sufficiently for retirement are very frightening.

superskully is incorrect by saying that if you have a pension fund then there is no tax benefit to having an RA as well. For some people this may be the case but for others not - it all depends on your situation. Who will be able to tell you this? A qualified Financial Planner.

bumblebee says that you should not allow an Adviser to set an annual escalation on contributions. Why not? If you pay once off for a service should you expect continued service? If I pay a an accountant for doing my taxes this year can I rightfully expect him to then do my taxes every year without further payments? Surely not? A Financial Planner should not just sign you up for an RA for example and never see you again. If they do then by all means pay once. A proper FP will visit you at least once a year and revise. Can you do everything yourself? When you needs extensions done to your house you could buy the building materials, draw your own plans and submit them, mix your own mortar and lay your own bricks. When your car is broken you could buy the parts and fix it yourself. But most people are happy to pay people to do things because it frees up your time to do things like earn an income or be with loved one. I agree that you shouldnt pay for rubbish but if it adds value to your life then you should expect to pay for expertise. Do you work for free?

In a nutshell an RA can be a useful tool for retirement planning.

[bumblebee]

Please read my post again, I did not say that.
You should pay for good advice given by an adviser. But only a fixed fee for services rendered each time you visit to analyze your portfolio.
You should also not use a person making commission for the sale of the product they advise you on, that person is a salesman.
A good financial adviser charges a fee for expertise, not commission for a sale.

On the annual escalation mentioned above, just make sure you can readjust it lower, or cease payments without any penalties should the need ever arise.
Otherwise an unforeseen change in circumstance years down the line may cost you dearly.

[vash87]

An advisor may also choose to earn commission because the small recurring payments of the clients accumulate, to form a more reliable income.