Finance - Life Cycle Phase 3: Wealth Distribution
(04 May 2011)

Wealth Distribution Phase

Life Cycle Phase 3: Wealth Distribution

Over a lifetime the financial stages that people will go through will vary enormously. Obviously the financial direction of a 25-year-old is going to be very different from the financial direction of a 75-year-old. There are essentially four broad categories from age 20 to 35 (starting out), to age 35 to 50 (mortgages and family commitments), to age 50 to 65 (planning for retirement) to retirement (age 65 +). There are of course strategies that are broadly applicable to each stage.


Midlife Ages 45 – 54

–      Assisting with higher education for children

–      Investing

–      Updating retirement plans

–      Developing estate plans

Pre-Retirement Ages 55 – 64

–      Consolidating assets

–      Planning future security

–      Re-evaluating property transfer

–      Investigating retirement part-time income or volunteer work

–      Evaluating expenses for retirement and current housing

–      Meeting responsibilities of ageing parents

Retired Ages 65 and older

–      Re-evaluating and adjusting living conditions and spending as related to health and income

–      Adjusting insurance programs for increasing risks

–      Acquiring assistance in management of personal and financial affairs

–      Finalizing estate plan

–      Finalizing will or letter of last instructions

Where are they in their life?

 Medical costs seem to be rocketing and you want to make sure that you can always get private health care, you're concerned about being able to live as comfortably after retirement as you did before you retired, you wonder if your retirement years will be longer than your working years, you want to make sure that your investments achieve inflation beating returns, your home is probably paid off.

You want to pay off all your debt, you may want to travel or take extended or spontaneous holidays, you may want to visit family overseas or you're busy rethinking your capital expenditure and rebudgeting your monthly expenses.


Things to do:

Number 1: Retirement is a long term proposition of 20, 30 or 40 years - don't be too short term in your planning.

Number 2: Think very carefully about inflation - If you invest R1 million today in a cash account returning 6 per cent a year it will provide R60,000 in income. However, in 30 years time R60,000 will buy less than half the goods and services it can today - because of inflation.

Number 3: Understand the Age Pension rules and what you are entitled to there, to help build a complete plan.

Other financial considerations

  • Consider diversifying your investments to reduce risk.
  • Look at your pension options.
  • Consider how to minimise tax on your pension fund moneys.
  • Reassess your income and capital portfolio.
  • Maintain your rigorous review process of your financial portfolio.
  • Ensure that you have a sound estate plan in place.

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