I am turning 37 in September and have R5 million cash from inheritance. I would like to invest it so that I can generate income of R20 000 per month, at an increase rate of 4% a year until age 60. The total number of years for investment is 22 years. I have a pension and I contribute monthly to other investments. This R5 million is for income only.
Growth assets get included from here onwards. These are funds you will typically only touch four or five years down the line, ensuring sufficient time for equities to recover should there be a downturn in the market. Growth assets consist of equity, property, local and offshore exposure. This is the asset class providing returns over the longer term of CPI+6%, CPI+7%.
If you do not wish to include this investment in your retirement planning 22 years down the line, you can opt to start withdrawing a higher income and essentially start depleting the capital. This assumes you are certain that you are making sufficient provision towards retirement and that your retirement requirements will be met. Otherwise this can supplement your retirement income wonderfully.
On these types of funds , you also need to be on the lookout for additional tax levied for the interest earned. This will be on the interest bearing portfolios , as well as capital gains tax on the equity exposure of the portfolio. If you remain invested in the same unit trust, you could avoid paying CGT for as long as you remain in that fund.
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