The Four Phases of Retirement | South African Economy Growing Again

The Four Phases of Retirement

Most of our clients today are enjoying their retirement, which is also partly due to us at PWM being around for 25 years. We have grown together with our clients over the years.

Holding regular face-to-face consultations, I found this article from Yahoo Finance, which I thought was particularly accurate.  

Based on interviews with more than 150 retirees, Dr. Riley Moynes, author of The Four Phases of Retirement: What to Expect When You’re Retiring, identified four psychological phases of retirement;

The ‘vacation’ phase

When you retire, you suddenly have no routine — and plenty of time on your hands. You now have the freedom to do whatever you want, whether playing golf daily or travelling in Europe. This is what Dr. Moynes dubs the “vacation” phase.

But it can be tempting during this phase to make large purchases that you might regret later, such as expensive cars, boats or luxury trips. You don’t want to end up funding this retirement phase by taking your Social Security benefits earlier than you need to, or by making large withdrawals from your retirement accounts.

Since your retirement could last 35 years or more, consider making a retirement budget, which considers how much to withdraw from which accounts at which time. A financial planner could prove invaluable in helping you enjoy your new freedom and still stay on track financially.

The ‘feeling lost’ phase

In time, many people become bored with the first phase of retirement and move on to a second phase, which Dr. Moyes refers to as “feeling lost.” During this phase, you start to feel the loss of routine, relationships, identity, purpose and power that you had in your working life.

This can be a difficult time, and it may coincide with the three D’s of retirement: decline, depression and divorce. In this phase, according to Dr. Moyes, we start to experience mental and physical decline, have a 40% chance of experiencing clinical depression and might even get a divorce.

At the same time, you might have to manage rising medical care expenses or navigate the financial fallout from divorce. On the other hand, you might be spending less on travel and other extravagances, and you’re likely receiving Social Security benefits since there’s no advantage to delaying them beyond age 70.

The ‘trial and error’ phase

According to Dr. Moynes, the “trial and error” phase is about rehabilitation, when you seek out new meaning and purpose in your life. It’s a time of trial and error, where you’ll try new things—and fail at many of them. Some people never move beyond this phase or even revert to previous phases, but by sticking it out, they can make it to phase four: the sweet spot.

The ‘reinvent and rewire’ phase

Only 60% to 65% of retirees ever reach the final “reinvent and rewire” phase, according to Dr. Moynes. But those who do find it to be the most meaningful phase of their lives: They’re busy, connected to other people, and making important contributions to society. In other words, they’re enjoying life to the fullest.

From a financial perspective, you’ll want to review your estate plan during this phase to ensure you leave behind the legacy you want. For example, there may be new causes or charities you want to support. And if your newfound purpose comes from part-time employment, you may have some additional income, which means you’ll need to update your retirement budget.

For most people, retirement is not an “everlasting vacation,” Dr. Moynes says. Rather, you need to work — just not in a job — to be good at being retired.

That requires introspection, and asking yourself some tough questions to find fulfilment.

Source: Expert says there are 4 phases of retirement — and all US seniors need to prepare for the ups and downs

Predictions that the South African economy will start growing again are proving correct

Old Mutual recently released the results of its annual Savings and Investment Monitor.

For the full details, you can click on this link: oldmutual.co.za/savingsmonitor/

The survey shows a very interesting trend: there’s a significant increase in optimism about personal finances.

68% of people feel their finances will improve in the next six months, financial satisfaction is the highest since 2015, and financial stress levels the lowest since 2020 (on Covid-19).

This as a backdrop, Natale Labia, via the Daily Maverick, recently shared his views on SA. Natale is a partner and chief economist of a global investment firm.

Natale joined Lionhead as a partner in 2016 and is involved in originating new opportunities, investment strategy development and investor relations across Europe and the Middle East. He is currently based in Milan.

He joined Lionhead after five years of investment banking at Nedbank Corporate and Investment Bank;

By Natale Labia

30 Jul 2024  

Has the tide finally turned on the South African economy?

In the early days, it seems that the new business-friendly coalition government has wrested back control of economic policy from the suffocating clutches of Luthuli House.

Investors are cautiously optimistic.

The market indications are clear. First, South African government debt has been a winning investment since the change of government. South African bonds have already returned a world-beating 9.3% in dollar terms this year, more than any other local-currency sovereign debt. According to Bloomberg data, the average return for other similarly rated emerging markets has been a miserly 0.1%.

The yield on the benchmark 2035 South African government bond has dropped about 140 basis points (1,4%) since the election in May to about 11% (bond prices move inversely to yields).

After a hiatus of several years when foreign buyers ignored South African bonds, offshore investors finally seem to be moving back into the market. They have been net buyers of the nation’s debt to the tune of R23.4 billion ($1.3 billion) this year—on track for the largest annual inflow since 2019, according to the JSE.

Foreign exchange markets have also cheered the change in government. While less pronounced than the shift of investor sentiment in the bond market, the ZAR has been almost 5% stronger against the USD since its pre-election weakest point in April, when it passed the R19 to the dollar level. It has since hovered below R18.5.

Equities, too, have seen a measured rebound. The JSE Top 40 is up 11.14% since mid-April, compared with only 8.25% for the MSCI Global benchmark. Even more indicative is its July performance compared with global indices.

Why SA will start growing again

Investors are pricing in a return to solid, if unspectacular, economic growth. As argued in this column in May it is possible, perhaps even likely, that “this could be the year which goes down as the moment the South African economy turns the corner and starts, albeit slowly and off a low base, growing again”.

Simply put, given the polycrises that South Africa has faced over the past five years, it cannot get much worse. 

Apart from the positive political news, other indicators are looking up. South Africa has gone more than 100 days without power cuts after record blackouts last year that crippled the economy. A plan to use gold and foreign exchange reserves to cut the budget deficit has lowered the government’s debt-service costs and improved the fiscal outlook. Inflation and monetary policy are also moving in the right direction. 

Futures market indications of South African inflation have dropped to the central bank’s target point of 4.5%, reinforcing bets for a policy easing cycle to begin in September. Forward-rate agreements that capture the September meeting show that traders fully price in a quarter-point cut. Monetary easing would have an exponential impact on highly indebted consumers and businesses. Things are potentially falling into place. 

The critical measures needed for faster growth

However, if the economy is to move from merely recovering to regaining the high-water mark of the post-apartheid era – the period from 2004 to 2008 when it consistently exceeded 3% GDP growth per annum, even hitting more than 5% in 2005 and 2006 – two things are needed.

First, the South African Reserve Bank (SARB) needs to do more. Market expectations are for three to four 25-basis point interest rate cuts over the coming 12 months. Should inflation materially subside that course of monetary policy would lead to restrictive monetary policy in real terms. The SARB must consider half a per cent cuts.

This would not be out of line with other central banks. The ECB has already started easing, and all expectations are that the Fed will also start cutting in September. Cutting alongside other central banks will minimise any potential weakness in the rand, limiting the chance of a resurgence in inflation.

Reserve Bank Governor Lesetja Kganyago must show courage. He should use his renewed support within the coalition government to deliver what the South African economy and consumers desperately need.

Second, and more difficult, are the longer-term structural reforms the economy requires to move back to a higher growth trajectory. It is not controversial as to what these are. Indeed, many were elucidated in President Cyril Ramaphosa’s State of the Nation Address. Transnet and Eskom need to be resuscitated and liberalised.

The process for work visa applications needs to be streamlined. Regulations for public-private partnerships and foreign investment need to be simplified to make South Africa once again a magnet for investors.

With functional state-owned entities, dependable power supply and a resurgence in foreign direct investment, GDP growth above 3% should be possible. None of this is unattainable or controversial.

Should these pieces of the puzzle fall into place, and with the proviso that the rest of the global economy does not plunge into recession, expect improving prospects for South African workers, business owners and investors. It is not asking too much. 

We live in hope. DM

Source: Predictions that the South African economy will start growing again have started proving correct

Next Week is a Short Week

Next week is a short week and next Friday is a public holiday celebrating Women’s Day.

Therefore, I won’t be emailing you here next week.

Friday Food for Thought