CONSOLIDATION: IS MORE REALLY BETTER?

Consolidation

Definition:

·         make (something) physically stronger or more solid:

The first phase of the project is to consolidate the outside walls

Strengthen (one’s position or power):

The company consolidated its position in the international market

·         combine (a number of things) into a single more effective or coherent whole

All manufacturing activities have been consolidated in new premises

Combine (a number of financial accounts or funds) into a single overall account or set of accounts.

More often than before, consumers are talking about making up for the years they “couldn’t” save towards retirement. With this has come with it a few radical ideas concerning; buying back years and having more than one retirement annuity allowing them to save more.

Now take a step back and think about it logically…

Quite counterproductive isn't it!

Consolidation is what all consumers need to be thinking about but aren't  We keep getting sold more products and get told that it’s what we need, but the truth is that it’s what industry related companies need in order to stay in business.

On average a retirement annuity will cost you 2% per annum, with an additional performance bonus annually if benchmarks are surpassed. On a retirement annuity with an invested amount of R100,000, you are giving away R2,000 every year excluding vat and any other “standard costs” you may incur.

Let’s look at a consumer who has more than one retirement vehicle and a total invested amount of R100,000. That’s an exorbitant total fee of 4% or more annually that’s been given away (not to mention the bank charges from “Steve’s’ bank”).

In the case of retirement, more is not better. We need to learn how to be conservative in the manner we do things. Once time is lost, it’s not something that we can get back and the same principles go for our retirement. Attempting to be more aggressive in our savings does not necessarily mean that we will be able to make up the deficit.

A simpler way to overcome the obstacles is rather be wiser in the portfolios and fund selections you make. Know what kind of appetite you have for risk and then look at your affordability. These factors would assist you in making calculated decisions regarding your retirement.

If you are already in the position where you have more than one retirement vehicle, the end is not nigh. You can consolidate the annuities, have only one concurrent vehicle and combine the premiums that you were paying. This will save you money on many unforeseen charges and allow you to give a bigger portion of your premium towards retirement and at the same time gaining more interest on the total investment.

So the moral of the story is; drink two less beers a week or one less bottle of wine a day and put that money to good use!

Have a great Friday!