Don’t Steal from Your Future

In South Africa, members of a pension fund are able to access their pension benefits before retirement and unfortunately many choose to do just that without fully knowing the effects that these early withdrawals can have. 

It may seem like a quick cash fix to draw from your pension fund when you face a job change or resign, but you are actually hurting yourself. Firstly, there will be a reduced amount available at retirement and there are also tax consequences. 

Withdrawing your pension before its time is a risky manoeuvre and can do more harm than good as you will be sabotaging your financial wellness in retirement. The sad truth is that only about 6% of South Africans are able to maintain their standard of living in retirement. The issue arises because of the high cost of living and rising debt, so many members are looking to access their retirement fund as a solution. 

You may have a decent lifestyle during your earning years, but often will not have a decent retirement secured. This is due to a lack of proper financial planning and discipline. 

It’s Not for Debt

If you are considering resigning to access your retirement fund so that you are able to use the cash to pay for your living expenses or to pay off debts, then stop and think again. You need to look at the reason you are in debt, which can usually be down to having a bad relationship with money and trying to fund a lifestyle that you are not able to afford. 

Having a budget can ensure that you do not live beyond your means and can help you to not steal from your future self. 

You need to practice restraint and not buy material things just because the people around you have them or because you have seen something on TV or social media. You can only fake wealth through loans and credit cards for a short period of time and it is not a sustainable way to live. Also, this will just lead you to a debt trap and you will end up paying more. Resist the urge to dip into your retirement fund and rather speak to a debt counsellor if you feel you are over-indebted. 

The bottom line is that you should not use your retirement fund for anything other than your retirement, no matter how bad the situation gets.

In the Days Before the Elections, Foreigners Dumped Billions in South African Bonds, But They Are Piling Back

International investors dumped billions in South African government bonds in the run up to the elections according to the JSE numbers. In the four trading days before Wednesday, international investors sold South African government bonds of R4.2 billion.

However, they started to pile back in straight after the elections even though there are fears of a global trade war. 

The first day back of trading after the elections showed that R372 million in local bonds went to net buyers. 

On the Friday after the election, increased gains showed that international buying probably accelerated. There was a gain of a percent on Friday to 8.45% for the government ten year R186 bond.

Forecasts proved to be correct as the election results increased the demand for bonds and could be said to be more positive than investors thought.

Local government bonds that have decent yields compared to other markets are being seen as valuable by international investors according to Edgar Mafoko the portfolio manager at FNB Wealth and Investments. The rand was also in a better spot on Friday as it was trading at R14.19 to the dollar.

However, due to a standoff between the US and China, the post-election gains were followed by a sharp slump in the global markets. 

Large losses occurred in the market ahead of the US governments decision to increase tariffs from 10% to 25% on $200 billion of Chinese goods on Friday. However, markets turned higher on Friday after US President Donald Trump received a letter from the Chinese President Xi Jinping that asked for the two countries to cooperate on a trade deal.  

According to Mafoko, the post election relief may take a few months to be seen. Also, the rand and bonds may start to run even harder if the trade tensions are resolved. 

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