Cash is not king
Did you hear that heartrending advert on the radio? It was a recently retired couple who finally found a bank that cares for them. Now they can take that dream cruise that they’ve talked about for years and they can retire comfortably knowing that their capital is guaranteed safe.
Why? Because the bank guarantees them a whopping 7 1/4% return.
Now, if real inflation was 6% (wishthink) that would mean that they have 1 1/4% available to spend, so if they want to retire on, say, R60 000 before tax (and the way they are talking about cruises etc. they would want a lot more than that), then the R720 000 a year must be 1 1/4% of their invested cash.
That means that they invested R57,6m with the bank! Wow, no wonder they think they’re OK. My take is that if they were clever enough to accumulate that kind of wealth during their working years, they would not be stupid enough to invest it with that bank.
No. When it comes to retirement, cash is not king!