Tracy Jensen, Chief Product Actuary, 10X Investments presented at the 10X Retirement Conference 2014 on the topic A sensible and sustainable draw-down strategy in retirement.

1. A sensible and sustainable
drawdown strategy in retirement
Tracy Jensen, 10X Investments

2. What matters?

3. Transition into retirement
Pre-retirement
Retirement

4. Preparing your members for retirement
National Treasury
Tools

5. Retirement goals
Income:
Term:
Inflation:
Flexibility:
Estate:

6. Retirement goals: personalised
65 year old male with R1m
Income: R4,200 pm (5%)
Term: Age 65 to 90
Inflation: Yes
Flexibility: Yes
Estate: Yes

7. What influences your retirement goals?
65 year old male with R1m

8. What influences your retirement goals?
65 year old male with R1m

9. Products to meet your goal
Living annuity = ‘investment’ product
You select income & investment but may not last
for life. Provides flexibility & possibility of estate.
Guaranteed annuity = insurance product
Income lasts for life but no estate* or flexibility
Cash
*May be a guarantee period during which income is received regardless

10. Overview of products
Guaranteed annuity
(inflation-linked)
Living annuity
Affordability
Longevity
Inflation
Flexibility
Estate

11. Living annuity
Income 2.5% to 17.5% pa
Term
Fees Investment (consider term)

12. Results
Income grows with inflation
Results shown after inflation
Returns from 1900 to 2013
Investments: Low equity
Medium equity
High equity
Fees (incl. VAT): 10X maximum 0.86% pa (R720 pm)
Industry 2.85% pa (R2,400 pm)
Industry fee comprises: Advice (0.75%), Administration (0.25%),
Investment management fee (1.5%), VAT (0.35%)

13. Living annuity: investments (fee of 0.86% pa)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
10X retirement income in today's money: average
markets
84
65 70 75 80 85 90 95 100
Monthly income after inflation
Age
Low Equity Medium Equity High Equity

14. Living annuity: investments (fee of 0.86% pa)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
10X retirement income in today's money: average
markets
84 95
65 70 75 80 85 90 95 100
Monthly income after inflation
Age
Low Equity Medium Equity High Equity

15. Living annuity: investments (fee of 0.86% pa)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
10X retirement income in today's money: average
markets
84 95 >100
65 70 75 80 85 90 95 100
Monthly income after inflation
Age
Low Equity Medium Equity High Equity

16. Living annuity: poor returns (fee of 0.86% pa)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
10X retirement income in today's money: poor markets
(worst 1 in 4)
79 82 90
65 70 75 80 85 90 95 100
Monthly income after inflation
Age
Low Equity Medium Equity High Equity

17. Living annuity: high fees (fee of 2.85% pa)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
Industry retirement income in today's money: average
markets
79 82 89
65 70 75 80 85 90 95 100
Monthly income after inflation
Age
Low Equity Medium Equity High Equity

18. Living annuity: impact of fees/poor returns
Investment
10X
(Fee of 0.86% pa)
Industry
(Fee of 2.85% pa)
Years of extra
income with 10X*
Low equity 84 79 5
Medium equity 95 82 13
High equity >100 89 24
Impact of high fees = Impact of poor returns
*Based on projected values

19. How do I reach my goal?
Goal = Income R4,200 pm from age 65 to 90, growing with inflation
Average markets: medium/high equity & low fees
Poor markets: high equity & low fees
With high fees you never reach your goal in average or poor markets*
*Based on projected values

20. Summary*
You’ll reach 5% income goal with: Low fees AND
Medium or high equity portfolio
High fees = 5 to 24 years less income
Equivalent to poor returns
*Based on projected values

21. Thank you