Momentum Wealth - Retirement Reimagined

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Reimagining retirement planning with innovative thinking Often, innovation lies in thinking differently about how we use things we already have in new ways to make life easier. How we have changed our thinking about retirement income planning and how we keep reimagining retirement is a testament to such innovation. The innovative way in which we “created” a new or alternative asset class to significantly enhance income planning during retirement will enable some of or all the following outcomes for clients: · Protect a certain future income stream · Enable capital growth · Sustain income for longer during retirement · Manage inheritance needs What is it, and how does it work? In 2022, we enhanced our living annuity product, the Retirement Income Option, on the Momentum Wealth platform to help people better structure their retirement income plans. They no longer have to choose between the certainty of a life annuity and the flexibility of a living annuity – they can have the best of both in one retirement income solution. By allocating a portion of their retirement savings to a life annuity component within their living annuity, people can personalise their income plan by deciding: · how much of their retirement savings they want to use to cover their essential “life expenses”; and · how much they want to use for their more flexible “living expenses”. This product enhancement helps people make more informed decisions about their retirement income planning. They can choose to allocate a portion of their retirement money to the Guaranteed Annuity Portfolio, which will pay a guaranteed income for as long as they live. At the same time, they have the investment flexibility to benefit from potential growth from investment markets and the possibility to leave a legacy, all in one living annuity. The Guaranteed Annuity Portfolio is a life annuity, which is available as an optional investment component to clients starting a new Retirement Income Option or who already have a Retirement Income Option. We are now also equipping financial advisors with a state-ofthe-art income illustrator to show different income scenarios to help clients choose the most suitable structure for their unique income needs and circumstances. The income illustrator brings together a set of multi-dimensional skills from various departments such as our Martin Riekert, Head of Retail Investments, Momentum Investments investment management teams, our economists, the actuarial product development team and our research unit known as the Research Hive. The merging of these disciplines into an easy-to-use illustration tool will aid financial advisors in providing holistic retirement advice in a way no one has imagined before. Momentum Wealth offers the most comprehensive range of investment and product solutions to implement clients’ retirement plans effectively and efficiently, from saving and investing towards retirement to generating an income during retirement. By blending the best of both worlds (the income certainty of a life annuity and the investment flexibility of a living annuity), we are partnering with financial advisors to help clients: · Make better decisions about structuring and implementing suitable income solutions when they retire. · Optimally manage their income during retirement to cater for changing income needs. Each person’s investing journey is unique and personal. With us, you can shape that journey in the most singular way. Talk to us to find out how you can elevate your expertise when advising your clients about planning their retirement and guiding them on their journey to success. For more information on how we’ve reimagined retirement, visit momentum.co.za. Momentum Wealth (Pty) Ltd (FSP 657) is an authorised financial services provider. Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406). The Retirement Income Option and the Guaranteed Annuity Portfolio are life insurance products, underwritten by Momentum Metropolitan Life Limited, a licensed life insurer under the Insurance Act and administered by Momentum Wealth (Pty) Ltd. The information in this article is for general information purposes and not intended to be an invitation to invest, professional advice or financial services under the Financial Advisory and Intermediary Services Act, 2002. Momentum Investments does not make any express or implied warranty about the accuracy of the information herein.
Your “factory settings” may be an important part of your retirement success (or lack thereof) Making an investment decision — like switching between different investment funds — at the wrong time can cost you money. We call this the “behaviour tax”. Often when markets become turbulent (both up as well as down), we struggle to make the right decision and instead make the comfortable one of moving to what we think is a place of safety. This “comfortable” decision cost investors in retirement nearly R500 million in “tax” during the Covid-19 pandemic, as they sold out after the market crash and then tried to get back into markets after it recovered*. During the pandemic, 75% of value destroyed was from those in retirement and after the pandemic in 2023, 65% of value eroded was from investors in retirement. Using machine-learning algorithms, we confirmed that both age and the size of the investment portfolio are two of the biggest predictors of switching behaviour. Our reaction to market movements is part of our personality or “factory settings” because of how market behaviour makes us feel. Our personality is a collection of thoughts and beliefs about the way the world of investing works. We call these factory settings as research shows that approximately half of our personality can be directly traced to our inherited genetic code. Two important personality traits or thought patterns determine these factory settings for investing and may be linked to the behaviour tax. The first is our preference for now compared to later. In the Stanford marshmallow experiment, kids were offered the choice to eat one marshmallow now or hold out for 10 minutes to receive a second marshmallow. This doesn’t seem long, but 10 minutes is a lifetime to a five-year-old waiting for a sugary treat. Some kids were just better than others at this game because they had different factory settings. Subsequent replications of the marshmallow experiment showed that successful kids were able to shift their attention away from the treats (like staring at the corner of the room) or distract themselves by thinking of other things. Interestingly, this refers indirectly to the concept of “flow”, or rather our perception of time when we are doing or thinking about things we like. The personality trait of conscientiousness refers to those of us who are naturally good at focusing on the future and reaching our goals. The second personality trait or thought pattern is our general level of anxiety or neuroticism. Some of us are wired to worry a little more than Our reaction to market movements is part of our personality or “factory settings” because of how market behaviour makes us feel. others. Being more anxious can result in an investment choice which makes us feel better now by acting and moving our money to “safer” asset classes during market turbulence. This is referred to as the actionoriented bias (just “do something”). This behaviour often results in the behaviour tax because inevitably, we miss the market recovery and get stuck in the wrong place at the right time when markets recover, and they always do. Having low levels of neuroticism makes us more composed in the face of uncertainty. It is important to note that no set of personality traits is deemed better or worse. There are, however, better and worse settings for any given situation. For example, having a spontaneous and impulsive partner can mean fascinating life experiences but left unchecked (without the right plans and strategies) these same traits also may result in poor investment outcomes. This is where self-awareness can make a difference. Incorporating the Guaranteed Annuity Portfolio (GAP) as an investment component in your retirement portfolio can improve retirement outcomes by adding much-needed certainty to retirement income planning and even enhance these outcomes in given circumstances. Knowing your factory settings and implementing investment strategies (like using the GAP) can be the difference between a behaviour dividend and a behaviour tax. *Source: Momentum Investments Sc-Fi report, November 2023 Paul Nixon, Head of Behavioural Finance, Momentum Investments Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP 6406) and registered credit (NCRCP173) provider.
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