Monday, October 29, 2012

Critical crossroads for labour.

What happens when both pay increases and further layoffs become impossible?

The simple and cynical answer to the question in the headline would be that the plant or operation simply closes, more people lose their jobs, and South Africa’s severe unemployment problem takes a further step into socio-economic mayhem.

But that would deny the escalating dire consequences, the presence of entrepreneurial ingenuity, a strong survival instinct on all sides, and a still critical mass of goodwill that seeks solutions rather than confrontation.

The average South African can be forgiven for having a strong sense of foreboding about recent events on the labour front. Demands have been ostensibly outrageous; strikes have again been spontaneous, violent and disruptive; and normal governing processes of centralised bargaining, conciliation, legal prescriptions and Trade Union control have simply broken down. Like climate change itself, we seem to be having more than one “strike season” a year. It’s not unfitting to assess these events as being revolutionary, especially against the political slogans of “economic freedom” and the problems of unemployment and inequality.

But the appearance of a revolution is also masking the inexorable path of an evolution: one that globally has started to challenge the Anglo-Saxon business model and in particular the supremacy of capital and the commodity expression of labour. This challenge does not necessarily threaten the need for free markets and freedom of choice. It is merely interrogating the inevitable outcome of conflict between the main stakeholders of capital, labour and state -- an inescapable result of a near exclusive focus on wealth distribution, whether in profits, wages or taxes, rather than on wealth creation itself: a focus on reward rather than contribution.

We see the same obsession at a national level. Everything is skewed towards what we can get, rather than what we have to give. Often conflicting goals such as profit maximisation, employment equity, job creation, minimum wages, labour laws, social security, housing, land reform, health care, and yes, even the irrefutable need for education can only be satisfied by meeting one fundamental condition – the creation of wealth in the first place. It is the sacred cow that we keep leading to the slaughter house to cut out prime steaks before it has had a chance to grow and multiply.

Like post-war Germany and Japan, we have to find a new labour accord and a less conflict ridden approach to real market informed wealth distribution in the workplace. It will require shedding some long and fanatically held ideological paradigms and ultimately come back to one fundamental and self-evident truth – that wealth can only be created by providing a product or service to another human being in an environment of free and fair transaction. All other considerations are subject to this condition. It is also the easiest thing to teach at any level of economic awareness, and to solicit allegiance to that common purpose.

While many are frightened by the apparent breakdown of structure in wage negotiations and collective bargaining, it can also be interpreted as an inevitable result of growing dysfunction in centralisation of power as well as dysfunctional labour markets either by manipulation at executive level, or extortion at the lower ranks. Add to that extreme lawlessness and intimidation, and collusion between government and capital, then ivory tower supply and demand theories simply become immaterial.

Much has been said and written about pay disparities in South Africa. In turn much of it relies on some dubious statistics and classical supply and demand theory which simply and dangerously scoff at the explosive role of mass envy and resentment. Unfortunately logic and scientific argument are no match for emotion and hysteria. They ignore the simple truth that perceptions create an experiential reality for a large body of people who have become deaf to this logic. We certainly need to quell the disruptive symptoms of economic imbalances, but we can’t ignore causes either.

So while the executive bonus and top earner wage freeze is little more than a gesture, and arguably a blunt, perhaps even trivial emotional tool, if it helps to reduce the national fever by a degree or two, then it has some validity as treating a symptom. In the longer term, however, we far too readily accept that there is a functional market at senior and executive level. Pay disparity is not only about pay differences, but also about perceived fairness and the validity of criteria that are used to reward different levels of employment. There are many, including shareholders and authoritative remuneration studies, which question the legitimacy of some executive earnings, irrespective of the wage gap and need for differentiated pay.

Fragmentation could be a good thing if it means a sharper focus on the wealth creation cell itself – individual sites and companies. There increased awareness, understanding and communications have become critical. It is far easier to teach people the principles of maximum wealth creation and optimum wealth distribution by making the information relevant to that particular workplace. It is also easier and more effective to strengthen this awareness through open and transparent channels of communication.

A 2nd important positive that could flow out of the current turmoil is one that answers my initial question: what happens when both lay-offs and pay hikes become unsustainable. The answer is of course, flexible pay. And it will require entrepreneurial ingenuity, survival instinct and a critical mass of goodwill – attributes that we are being forced to adopt as the walls of labour unrest on the one side and critical unemployment levels on the other close in to crush us.

So it is not surprising that the Chamber of Mines proposed exploring profit sharing as one element of solving mine labour turmoil. We’ve been there before, of course, so it will be interesting to see what new designs it comes up with and how it will avoid the failure of these schemes so far to temper belligerent wage demands, or a recurrence of the much vaunted Kumba share option scheme which could not prevent newly created semi-millionaires from going on strike for higher wages.

The inherent problem with employee profit sharing is that wages are seen as a cost to profit so certain employees can benefit at the expense of others being laid off.

There are four absolute pre-requisites for any form of flexible pay:

· It must be simple and understandable,

· It must have a clear line of sight where employees can see the effect of actions or events on wealth creation and their pay,

· It has to be accompanied by regular and understandable information sharing.

· Pay-outs or feedback must be regular – at least quarterly if not monthly.

Conventional profit sharing schemes can seldom meet these requirements – share option schemes even less so.

But I have personally witnessed (see this article) how easy it is to teach and communicate principles of wealth creation and distribution at any level of awareness and comprehension in the workplace. We developed such a programme called People and Wealth at the then Western Areas Gold mine in the early 90’s. It was championed by the HR Manager at the time, Ben Coetsee, whose passion for enhancing understanding was driven by some traumatic labour violence years before.

Using illustrations, role play, replicated bank notes, and objects such as beads and beadwork, we watched in amazement how an illiterate Mozambican mine-worker could explain wealth creation and distribution at the mine, in effect bringing to life the mine’s value-added statement. I used the final product effectively in many other sites during my consulting days, and it lives on in the work being done by Fayruz Abrahams in Port Elizabeth.

Flexible pay requires a certain level of trust between the stakeholders. For that they have to be on the same page, have access to understandable information and share some common goals: features that are essential for normalising industrial relations.

I have little doubt that the current tumult is moving us in that direction.

Monday, October 22, 2012

From carrot to stick.

We have passed a perilous point when threats become a dominant part of negotiation.

Ben Coetsee has passed on. He was the hero I wrote about in an article some time back who found himself in the midst of a mob of striking miners that murdered a close colleague. They crushed his colleague’s skull with home fashioned pangas and stabbed him in the chest with a length of sharpened rebar.

Ben had joined a group of officials that had gone to the arena of the West Rand mine to appease a few thousand striking workers. As they made their way to the centre of the arena, they were attacked by a group of chanting and crazed strikers. Dragging their severely wounded and dying colleague with them, they all sprinted for the car, bundled in and drove through a gauntlet of rocks, bricks and panga slashes until they were able to reach the relative safety of the mine offices.

It was not only that act that has earned Ben a reluctant accolade of heroism, but also what he told me about a year ago: “I have a fundamental belief in the good of most human beings,” he said. “Even at the time, I believed that most on all sides were sincere in trying to resolve our differences.”

Alas, not even a big, pure and generous heart can withstand physical failure that prematurely removes from our midst the precious likes of Ben. They are needed most in these troubled times. Puzzlingly so when one thinks that those were the tumultuous 80’s and incidents of that kind, of which there were many, were viewed as “growing pains” in an arena that was to fashion “labour laws amongst the most advanced in the world.”

Like many of the provisions of our revered Constitution, those aspirations were written in stone as if to ensure their unassailable truth and permanence. Yet they lie in shreds, forlorn and impossible to nurture in an atmosphere of malevolence and unbridled, undisciplined mob action.

Intolerable incongruities and hypocrisies are endured daily in the name of sanctimonious theories of freedom and rights. The right to strike automatically implies the right to extort and intimidate – removing from others an even more precious right to work. The right to protest invariably leads to the impediment of the freedom of movement of others. The right to coerce overrides a national right to expect unimpaired economic growth, job creation and enhanced prosperity.

Above all, we have reached a point where the right to industrial action often implies superseding the most fundamental right of all – the right to life itself.

The law really does become the proverbial ass when the trucking industry has to apply for an interdict to stop strikers from behaving lawlessly -- even more so when it fails dismally to hold a group to account because the blame resides with unidentifiable individuals in that group. When employees base demands on a simple calculation between the cost of a strike and the cost of their demands, all rational thinking is lost. According to an ENCA report, Kumba striking miners made a simple calculation to support their demand for a R15000 pm increase: that a strike would cost the employer more than the increase would.

Of course the logic is severely flawed, but the key and frightening issue is that wild-cat strikes, violence and intimidation are now seen as a relevant factor in bargaining itself; indeed that extortion is no longer a vice but a legitimate part of the process. It is what happens when expectations lose touch completely with reality. One can only guess the extent to which misguided and misunderstood employee share options and of course dubious executive pay levels help fuel these. If Kumba workers are examples of worker capitalists then heaven protect us from its growth.

But those are theories that belong in the endless debate about causes – a debate that fills the news and current affairs media, as well as the minds and utterances of politicians, analysts, academics and yes, even journalists like myself. The same refrain was sung after President Zuma’s meeting with stakeholders when a more assuring stance would have detailed immediate and determined steps to quell the unrest.

Causes are always valid and cannot be ignored. Indeed even the current turmoil may reflect a deeper evolution which I intend writing about soon. But what we have to deal with most urgently are symptoms, irrespective of causes. If we don’t effectively treat the symptoms, addressing the causes will escape us. Murder is murder; violence is violence; and intimidation is intimidation. We have to address those ruthlessly regardless of arguments around extenuating circumstances.

The rules of accountability have to be rigorously tightened. If recklessly driving pop stars can be found guilty of murder because they “could reasonably have foreseen the possible consequences of their actions”, then surely the same rules can apply to industrial action and its organisers. Its timing and context may have been unfortunate but the NPA’s aborted attempt to apply common purpose in the Marikana murders may merit a revisit in future circumstances.

Jurisprudence and law become irrelevant when the threat of more lawlessness impairs action against current lawlessness. It’s a tool the Mafia used to great effect. It gives substance to Edmund Burke’s state of evil triumphing “when good men stand by and do nothing”.

There’s a point at which liberty becomes a threat to itself. At that point the velvet glove has to be removed to reveal the iron fist.

No right can be absolute.

Tuesday, October 16, 2012

The life issues of retirement.

A happy retirement may mean reinventing oneself, says Jerry Schuitema.

I have spent some time with quite a number of retirees since joining that demographic group a few years ago. It is dangerous to generalise, and perhaps I am someone who attracts misery more than most. But what strikes me is that the prospect of achieving the inner peace and contentment that one would expect from having none of the daily stresses of a working life seems to escape many. Most of us aspire to a blissful state during our active lives, and certainly hope to achieve it in the freedom of our sunset years.

There are of course, many retirement counsellors and it is not a bad idea to approach one or two. I’m presenting my thoughts not as one of those, but from my own experience and observations.

Provision and financial security remain the key concern for most middle class former employees, small entrepreneurs, tradesmen and even some professionals. While financial planners may feel justified in using this in their sales pitches to young and middle aged adults, it is a concern that does not necessarily go away with having adequate financial plans in place.

Indeed, what is quite surprising is to find that the level of concern does not differ much between those who have retired on the bare minimum and those with much higher levels of financial security. This is only partly due to an attempt to maintain pre-retirement lifestyles and implies that these concerns are largely self-defined.

In truth, the concern is less about the state of finances, than about the loss of options to earn income to improve the current state. That concern seems to linger until financial security exceeds by a good margin one’s own perception of or calculated requirement. By nature we all foster a sub-conscious confidence that tomorrow will be better than today. It’s what kept us going in our younger days when many of us were quite prepared to live within modest means while patiently holding on to the belief that things would improve and would be better for our children.

Adjusting to the reality that today is what is going to be, and perhaps even better than tomorrow is a huge leap for most people, many of whom are not even aware that it could be the source of inner agitation. But it is an essential adjustment for a relatively relaxed retirement and “living in the moment” is the most important life skill for that adjustment.

A perhaps self-evident but often neglected condition for living in the moment is to avoid deadlines as much as possible. Deadlines are the future’s way of destroying serenity in the present. We can often avoid them by simply not postponing until the last moment what can be done today. (Have you done your tax returns yet?)

If one has the option of earning extra income then one should pursue it, but not to the excess of an acquaintance I mentioned previously, who slaved at something he hated, and then died to never really enjoy his more than adequate retirement funding.

The lingering need for exponential improvement of and control over one’s state drives many to some quite misguided ventures which more often than not they are totally unfamiliar with. A popular one seems to be a “guest house” or “coffee shop” at the coast. Swellendam, and I imagine many others on the popular Southern Cape Coast, have seen a number of inland retirees leave disillusioned and poorer after the failure of such ventures.

Coupled with the loss of active earnings, is the loss of a sense of purpose. One of my favourite quotes is that of Eleanor Roosevelt who said: “When you cease to make a contribution, you die.” For a large part of our lives we have defined ourselves by what we do, our work, and by those with whom we have associated with in a professional capacity. Retirement cuts that umbilical cord and it’s not easy to grow a new one. (Terrible analogy, I know!)

One simply has to find comfort in the fact that rarely can anyone, including great icons of the past and present, continue to make a contribution to the end of their days. One reaches a point of simply having to look back and be satisfied with whatever one has achieved. Smaller acts of contribution, like volunteering for a church bazaar, do not rank lower than those applauded by a stadium of admiring followers. The latter is more about satisfying one’s ego than achieving real self-worth. By this time, one should have reached the maturity that no longer seeks the good opinion of others.

A sense of loss seems to be quite pervasive in many of the retirees I spoke with and it is more than losing regular earnings and purpose. As one progresses into retirement one experiences the fading away of previous friends and acquaintances, especially those that were professional and work connections. The older one gets, the more difficult it is to forge new relationships. I’ve heard it said that one does not make many new friends after the age of 40 or so. That may be a personality issue, but I suspect it also has to do with being less flexible and tolerant as one gets older.

What one can’t avoid is the number of family members, friends and acquaintances who pass on, increasing one’s sense of loss and awareness of one’s own mortality. The latter can be depressing, but can also be a gift in persuading one to live in the moment; focus on what is important; reflect without melancholy; let go of anger and regrets, and shed clutter. Accumulation and ownership at this stage of one’s life is purposeless and burdensome. Empty spaces are much better filled by strengthening one’s relationships with those closest to one, and reconciling with those that may have drifted because of some or other past grievance.

If you have a life partner, an important discussion should be about having as much space between you as about doing things together. It’s perhaps an odd observation to throw in here, but I always sense a touch of underlying acrimony in many retired couples. It’s most likely caused by the sudden 24/7 togetherness which even young couples much in love will find difficult to cope with.

Travel is a favourite activity for those that can afford it. This is probably a prejudiced view from someone who travelled quite a bit in his younger days but I cannot see much value in it today. I simply got tired of the schlep of crowded airports; baggage fetching and carrying; in and out of trains, buses or taxis; standing in queues; and trying to make sense of discourteous people babbling in a foreign language.

Avid travellers will disagree with me, but I often wonder whether it is not chasing shadows, a trivial diversion, filling one’s memory bank with more snapshots that crowd out other, more important but perhaps not so pleasant things that need attention.

The older one gets, the more the journey becomes an inner one, forced upon us by increasing frailty. It’s a journey one can rehearse to avoid being overwhelmed by it when that time inexorably arrives. The key lies in an ability to detach without rancour, or to love without attachment.

Psychology doyens inform us that inner peace and contentment is as much a matter of mind as it is of circumstance. Retirement demands a new and different mind-set for us to achieve that. It’s a question of reinventing oneself.

Tuesday, October 9, 2012

The living issues of retirement.

The existential choices one has to make before and during retirement.

Remember when the old folk became part of the extended family: loved and respected “counsellors” who still led the prayer at supper time? Then came Dr Spock to replace parenting advice, and today we have the internet which needs only a few touches on the keyboard to tell you everything and much more than the BBC (born before computers) generation could ever tell you. So while our children have made us redundant as counsellors, they in turn are being displaced by the “Google generation”.

Today both sides of the generation groups seem to prefer “independence” for the elderly or reliance on some or other communal compound or institution. So one of the most important decisions one has to make before or early on in retirement is where to stay. Equally important is whether it is a final move or simply a bridge between an active and passive life. There are many options and they affect a number of financial and existential issues that may be in conflict.

It makes sense to hold on to one’s home for as long as possible, but most will ultimately be confronted with the need to move. Selling one’s home brings with it a sense of loss of control and conversely renting gives one a sense of being under someone else’s control. But these are perceptions more than reality. Owning a home too big for an ageing couple could be as constrictive to one’s choices as having a landlord.

I divested from fixed property partly for financial reasons, but also for mobility and other existential needs. My terminally ill wife needed frail care so I moved to a village with frail care facilities. It was a mistake for a number of reasons. Frail care is not always what it is made out to be and there is a fine line between that and hospitalisation – a line perhaps too readily crossed by frail care staff. One should seriously consider home care nursing as an option. It need not cost much more than permanent frail care, especially if covered by medical aid, and there’s considerable comfort for someone surrounded by familiar faces in familiar surroundings.

This of course, raises the perplexing issue of medical cover. My premium has increased three-fold in as many years and no doubt many retirees have experienced something similar. Even those with company subsidies have added substantially to average retirement living costs.

I don’t have an answer on dealing with matters medical. It’s a highly personal circumstance, but a common fate that most face is downgrading their cover to basic, or reverting to cheaper hospital plans. I put away a certain amount every month for “other” medical expenses. It seldom covers what I need.

Insurance by its very nature relies on the fear and insecurity of the insured. Premiums are more the price of peace of mind than to cover real events. If only we were made of sterner stuff and had the financial discipline in our younger days to establish our own “contingency funds”! And perhaps the key to some serenity lies in having that courage. Once you have done what you can afford, the rest must be placed in the hands of benevolent gods.

Regarding accommodation, I opted for an occupational rights facility as opposed to a free hold unit. Big mistake, especially if it turns out not to be your last move! It means that you get back a portion (normally 80%) of what you paid for your unit investment, not what they sell it for and you cannot rent it out, sublet or have more than the registered occupants. What they also don’t tell you is that if you move you must still pay for most of the wear and tear, damage or alterations that you have done, over and above the 20% they swallow. In four years, the levies increased by 300% to a level that could rent a reasonably sized home in a small town. Residents have no “corporate body” type say in running the village, and some of the administrators treated residents like dementia patients.

I could write a book about that experience – but I can’t make up my mind whether it should be comedy or tragedy. Retirement villages have a number of obvious benefits such as security and “lock-up-and-go”. What they cannot provide for though, is the behaviour of the residents, many of whom find it difficult to adjust from secluded suburban living to a more intimate environment and frankly become difficult and crabby Prima Donnas. A friend or neighbour today is gone tomorrow, either because of the grim reaper or some dispute which more often than not was the result of not fully understanding boundaries of courtesy in visiting or sharing communal facilities. One also need not be reminded of one’s own mortality weekly or monthly.

But there are many other options of communal living within a frail care environment. It is a personal choice that requires a lot of diligent thought and above all, a keen knowledge of oneself. In retrospect, I believe this option is best achieved by selecting a retirement village in a smaller town still within an hour or two of major medical facilities, where the units are much cheaper, frail care also modestly priced, and where people have a warmth and sense of camaraderie that you simply don’t find in the big cities.

One can also rent these units and in most cases the levies, either included in the rent or paid separately, enable access to communal benefits such as temporary frail care, meals and entertainment facilities.

It is often said that one should not move away from an environment where one has a support base of family and friends. But one can, albeit with some effort, establish that base in any area. Staying purely for family reasons is a very personal and emotional decision that very often leads to disappointment. Also that base is not as permanent as one may expect.

A popular option is moving to the coast. If you do, it will most likely not be your last move, and you should consider renting a coastal property before buying one. Living close to the sea needs a lot of house-cleaning and maintenance, and one is also invariably separated from family and friends and proper medical facilities.

It’s amazing how often people who live and work at the coast, move to an inland town or city on retirement and vice versa. The same goes for moving to a rural setting like I did. My rent here is about half of the levies I paid in the retirement village in Johannesburg. While rented farm houses are mostly extremely cheap, they are also difficult to obtain close to town. But one can easily find reasonably sized homes for between R3000 to R4000 pm in town – even cheaper in some of the less popular but still attractive towns in the area.

Plot living and achieving a measure of self-sufficiency is tough and one’s declining abilities and energy very soon result in an abandonment of pet projects. Also the mobility I sought in selling my own home has been constrained by other factors such as security and the need for house- and pet-sitters when we are away.

Interestingly, and we all know this, even paradise becomes mundane and you quickly stop noticing your idyllic surroundings. But I know with equal certainty that if I moved, I would just as quickly mourn the loss of those surroundings. The real trick is when you leave one environment then, like Vegas, what happened there should stay there.

It is equally so with retirement itself. It should never be simply about escaping one phase of one’s life. Rather it is about starting and adjusting to a new one, and leaving all the previous baggage behind.

But this is an emotional issue, exceeding by far the financial and existential issues of retirement. It will be my next subject.

Wednesday, October 3, 2012

Financing your retirement.

Sharing experiences on key financial questions after retirement.

We are a rapidly increasing number of people– that group for whom financial planning is no longer relevant, but where the fruits of that planning are: or should be.

Have you noticed how little advice for this group comes from that vast body of ever keen financial planners and advisors? Most of the advice assumes employment earnings, has about a three to five year gestation, or even longer – too long for the average retiree – and seldom cater for the need to draw a regular monthly income. I suspect that many Moneyweb readers are in this age group and have a combined depth of experience that may be useful to share with others.

A story that comes to mind each time I read the insights of those no doubt well intended wealth building soothsayers is the one about the wise old woman from the Cape Flats. Listening to a bunch of her men folk jabbering on about how they were going to make money she interjected in a heavy indigenous Cape accent that defies the written word: “You! You all make plans, but God has his own plans for you!”

I don’t believe in a “one-size-fits” all financial plan. In my financial reporting days I never seriously considered offers to write an investment column because I was not comfortable with the idea of giving individually relevant investment advice through mass media. Also, I had little interest in the subject and would rather take risks for a missionary ideal than for money. My approach to my retirement funding probably reflects this, but is also a fit between comfort and risk and then a resignation to living with that without letting go completely of regular oversight. This is a more important principle than constant obsessing about risk for higher returns.

Despite FSB rules, one is horrified at the number of people who still get “caught” by scams, schemes, and poor investment advice. Redress is mostly useless, costly, time consuming and stressful. I fume a bit when I see the smug comments about the victims being caught out by their own greed. These are often desperate people caught in a trap of declining income values and increasing living costs far beyond what the CPI shows. Flinging caveat emptor in their face is callous.

Even the most immodest of the wealthy cannot claim that luck played absolutely no part in their fortunes. Likewise for many others life has thrown them some curved balls, sometimes late in life, which they simply could not return. It’s always baffled me that we can admire the former and despise the latter. Prudence and modesty are no guarantees against misfortune.

Amongst my friends and acquaintances were those hammered by trust in others, the property and stock market slump, medical misfortunes, disappointing endowment policy performances and R.A.’s not matching advisors’ promises. You can probably list a lot more. Then, of course, there are those who have retired on a monthly pension and/or annuity, spent their lump sum pay out on that dream cruise, and are now facing the squeeze of eroding incomes and higher living costs.

One that gets me into a real frenzy is Gill Marcus’s absolute disdain for the plight of retirees and the economic reality that lower rates have done little to promote growth and create jobs. For the some of the general public it has enabled debt reduction, for others it has encouraged more debt.

For the elderly investor “50 basis points” translates into a 10% or so loss, and their income from this source has more than halved since June 2008. It has forced many into riskier asset classes and a faster erosion of the remaining interest earning capital. Compound interest works in reverse too. If you draw a fixed monthly income above your interest yield, the remaining capital declines exponentially.

A good way to start is to examine your current needs and the capital needed for your expected life span – already a calculation fraught with unknowns. But a gross monthly income starting at say R15 000 to last 20 years or so will need at least R2m on current average investment yields and to keep pace with official (not individual) inflation.

Of course being and staying debt free is a great comfort, unless it is amortized debt close to the end of its term. Then most of the interest has been paid anyway, and it may be better to use that money for some interest yielding instrument. That calculation is easy to make or obtained from the financial institution owed.

I have spoken to many retirees including those with inflation adjusted pensions, and the thing that strikes me most is how often their financial situation deteriorates over time despite euphoria at the time of retirement. So, perhaps after a “gap year”, you may need to explore all means of generating alternative income for as long as possible. Here too, it’s a question of balance between the existential, emotional and financial. An acquaintance of mine was so panicked by his state that he slaved miserably filling vending machines for 12 hours a day and then passed away leaving a R3m estate.

Maintaining your own bond free or largely unencumbered home is as much an existential decision as a financial one. But it represents both capital and potential income. Having, or applying a significant part of retirement capital into properties for rent is a questionable cause. I’ve had a number of tenants in my life and when they are good they are mostly so-so. When they are bad, boy are they a long term legally protected headache! It takes a special breed to be a landlord. If you are not up to it but still want exposure to property, then rather invest in a property fund, trust or company. Syndicates by and large are unfortunately highly risky.

Declining interest rates require shifting classes to make up for lower cash yields. If you have a living annuity try to keep the monthly return prudent and become active in switching the RA portfolio assets when allowed to. In most cases it can be done once a year at no cost. Whatever you do, be as informed as possible to let advisors know that they are not dealing with an ignoramus.

In my approach I divested from fixed assets completely and while I shifted significantly from cash to equity, Unit Trusts and ETF’s, I believe I have kept a fair balance between classes. ETF’s give some flexibility between income and capital preservation by being able to augment income with timely unit sales.

You could, of course, rely on someone else to achieve asset balance through investing in an asset allocation flexible fund.

The most important thing is to find a suitable mix that you can be comfortable with over a reasonable period. It is more important to avoid agitation every time something happens in one or other asset class than to try and get maximum yields from your retirement funding.

Nothing can destroy one’s retirement serenity more than concern about provision. Most retirees will ultimately be faced with a race between their longevity and the life of their capital. It’s coming to terms with that reality that is the only source of contentment, even if it means making a pact with the universe that one’s last cheque can bounce.

But there are other equally if not more important existential and emotional factors that can destroy a peaceful retirement. I’ll examine these in future articles.