RA or Bond?

supersunbird said:
Is saving above the 15% of non-retirement funding income in an RA really that bad and pointless(as stated above)?
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No investment is ever bad or pointless.

But the problem with RA is that it's locked down till retirement age and there's nothing you can do about it. Also contractually you are normally locked into paying that premium every month for I think 3 or 5 years if you don't want to suffer penalties for stopping payment.

So putting anything above and beyond 15% in alternative investments makes a lot more sense.
 
SauRoNZA said:
Initially when we first got our home loan we put only 10% of each our salaries (20% of total household) into our RA's
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Learn to maths bro... :wtf:

10% of x + 10% of y is 10% of (x+y) not 20% of (x+y)
 
SauRoNZA said:
No investment is ever bad or pointless.

But the problem with RA is that it's locked down till retirement age and there's nothing you can do about it. Also contractually you are normally locked into paying that premium every month for I think 3 or 5 years if you don't want to suffer penalties for stopping payment.

So putting anything above and beyond 15% in alternative investments makes a lot more sense.
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Only if you use and Life Companies contract type RA, if a unit trust RA (from allan gray or coronation fom example) there are no penalties. Yes, your money is locked in, but no creditor can get at it, and neither can you and arent we sometimes our own worst enemies ;)?
 
supersunbird said:
Only if you use and Life Companies contract type RA, if a unit trust RA (from allan gray or coronation fom example) there are no penalties. Yes, your money is locked in, but no creditor can get at it, and neither can you and arent we sometimes our own worst enemies ;)?
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Surely there is still an initial minimum contract period to complete for initiation fees and such to be absorbed? Or do you just pay those outright from the word go?

I did say "normally" because I wasn't 100% sure it works the same across the board.


Then again come to think of it my Old Mutual RA doesn't have any monthly fees, while my Alexander Forbes (which is Allan Grey unit trust based) has bull**** fees of almost R150 a month for "advice" and other crap.
 
supersunbird said:
What were they trying to achieve anyway?
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To make sure people saving for there retirement dont invest in pyramid schemes/ speculative hedge funds, etc. Trying to protect the public from themselves via the law. But the problem is you can be 100% invested in defensive/ high dividend paying stocks and this would be a great investment for retirement.
 
SauRoNZA said:
Surely there is still an initial minimum contract period to complete for initiation fees and such to be absorbed? Or do you just pay those outright from the word go?

I did say "normally" because I wasn't 100% sure it works the same across the board.


Then again come to think of it my Old Mutual RA doesn't have any monthly fees, while my Alexander Forbes (which is Allan Grey unit trust based) has bull**** fees of almost R150 a month for "advice" and other crap.
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No, there is no lock in period with LISP based RA investments. The fees are transparent to which is great. Flexibility is excellent to, you can increase, decrease or stop contributions as you please and you wont have to take a penalty.
 
I little tip from someone who has done just what you were asking:

If you split your risk between RA and Bond you also split your pressure to make future decisions. I pumped all my spare cash into my bond and vehicle, paid both off fast ( then the plan was to buy another property and then start an RA at 30 ).

This way I would have a primary residence and investment property and a RA. 2007 purchased first property, bought car, paid off car am almost finsihed property ( but suddenly the property market has been pretty flat ) so hmmm now I was under pressure to do something as I had spare cash and a very low bond but no desire to purchase another Investment just yet,

Luckily I changed jobs and was forced to PA into a pension at 15% and fund a wedding. Now I look back and am pretty happy that I now have a Pension ( from aged 29 ) - I will get 45% of my current salary at retirement age of 55 ( which is very low ) or 100% at 65.

I also can now take my time with a second property and all in all should be on the right track. Sometimes forced savings helps alot.
 
supersunbird said:
Is saving above the 15% of non-retirement funding income in an RA really that bad and pointless(as stated above)?

Sure, you might not get that maximum tax return benefit but you still get those tax free investment returns and growth in the RA and the extra paid in carries over to when you retire.
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You are correct that any contributions over 15% will serve to increase your tax free amount at retirement. However, most people don't know this but when contributions over the tax deductible amount are made, the amounts that didn't qualify for a deduction roll over for deduction the next year (or the next year where the max isn't contributed). So assuming you don't contribute the full amount every single year until you retire, it is likely that you won't have to wait until you actually retire to get the deduction.

This only applies to retirement annuities - not pension and provident funds..
 
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