There is no such thing as a dumb question when it comes to personal finance.
According to investment expert Asavela Gwele, asking questions and learning more about your retirement savings and investments leads to the best outcome.
“No one cares about your money more than you do. So, get involved, ask questions. Those questions can be anything from ‘How do I get my statement?’ to ‘What happens to my money if I pass on?”
Below, Investment Consultant at 10X Investments Asavela Gwele, shares the questions and answers retirement savers need to ask to ensure that they are on the right track to a secure financial future.
Am I on track to reach my savings goal?
Saving for retirement without having a plan in place is like getting on a train without checking the destination. Online calculators can help you get started. Simply add a few basic details such as your age, your income and how much you have saved to generate a savings goal and a retirement plan. Once you have a plan in place, it’s important to check that you’re on track to achieving your goal. Revisit that plan regularly, especially if your circumstances change. If you start a new job or get a promotion, take a look at the plan and make adjustments so your plan keeps up with your life.
What am I paying in fees?
Again, this is something that should be easy to understand. Paying a high proportion of your growth in fees is a very common mistake in retirement saving. Based on a comparative study by 10X Investments, the average individual retirement saver in South Africa pays around 3% in fees (including advice, administration and investment management). But there’s a new breed of asset managers that charges significantly less (the 10X fee is less than 1% before VAT). Paying high fees can do more damage to your investment than you might think possible. Losing a chunk of your fund’s total to fees every year costs you a lot more than the fees you lose. It also costs you the growth on that money and the growth on that growth over time.
Understanding how much you are paying in fees should be easy. It can seem a little complicated when the fees and costs for various aspects of management are calculated separately and according to different pricing formulas, such as a percentage of the value of your assets for one cost and a monthly rate for another. But there is a way to cut through all the mystery and confusion. The equivalent annual cost (EAC) will give you a number that is simple to understand and compare across providers. If you’re still in doubt, ask your provider to do a free fee analysis and cost comparison for you.
How is my fund performing?
You should receive regular statements from your provider. Don’t just put them in the trash or your read another time folder. Take a moment to look at how you are doing. It should be simple enough to see how your investment is growing. If you don’t understand your statement, ask your broker or a representative of the fund. This is your money that you’re paying someone else to manage. They should be able to tell you how you’re doing.
What else am I getting for my money?
Retirement funds offer additional benefits, everything from financial planning tools to life cover, disability insurance and policies that cover the costs of a funeral for family members. It’s always good to know what you have, especially since you may be buying duplicate insurance cover.
The answers to these questions will be a good starting point to understanding the basics of your retirement savings fund. Too many people shy away from asking the most basic questions because they are afraid or feel awkward. What you really should be afraid of is waking up too late to the reality that you took the wrong train or, worse, are stuck in the wrong retirement.