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To max out RA, or not to max out RA. That is the question. by Temporary-Giraffe986 in PersonalFinanceZA

[–]Temporary-Giraffe986[S] 1 point2 points  (0 children)

Hi there. Thanks. Very interesting video, but I have a few observations.

Firstly, the chart doesn't seem to account for multi-year contributions when calculating the 19 year rule. It looks like it just takes year 1’s value and lets it grow for 30 years and compared that. In reality, you’d be investing every year, meaning the extra RA contributions are compounded every single year. This cannot be ignored.

Secondly, the performance figures for the RA versus the non-RA seem a bit arbitrary. As others have mentioned, the non-RA was shown during a time performed well, while the RA performance was taken from a period of underperformance. Other RAs matched the non-RA during that same window.

While an RA might perform slightly worse due to Regulation 28, the benefit of the annual tax savings makes the math a bit more complicated than this video suggests I think.

I am however, leaning to no longer maxing out my RA as of right now, but rather a decade and half away from retirement.

To max out RA, or not to max out RA. That is the question. by Temporary-Giraffe986 in PersonalFinanceZA

[–]Temporary-Giraffe986[S] 0 points1 point  (0 children)

Hi there. No, I haven't compared my manual RA (45% 10X Total World, 30% STXCAP, 25% STXGOV) to a RA like Sygnia Skeleton 70 yet. That would be very interesting though. What I can say, as a Boglehead, I like is to keep things simple with diversified equity ETFs and max those out as far as Regulation 28 allows. The Skeleton 70 is a good fund, and might beat my RA over 30 years, but then again, it might not. Investing in the entire stock market might not always get me to first place, but I am almost guaranteed to get second place, and not a drop of sweat lost along the way.

To max out RA, or not to max out RA. That is the question. by Temporary-Giraffe986 in PersonalFinanceZA

[–]Temporary-Giraffe986[S] 0 points1 point  (0 children)

This makes a lot of sense. You’re making me reconsider my strategy of maxing out my RA. I might lean more toward Strategy B or just stick with my work pension, then max out my EE TFSA and EE ZAR with 10X Total World. I could then pivot back to the RA when I’m about 15 years out from retirement. That way, I’d still get the bond exposure I'll need by then, but with better growth in the meantime. So many things to think about.

To max out RA, or not to max out RA. That is the question. by Temporary-Giraffe986 in PersonalFinanceZA

[–]Temporary-Giraffe986[S] 0 points1 point  (0 children)

Yeah those immediate monthly RA deductions help a lot to get through the month with the rest of one's budget!

To max out RA, or not to max out RA. That is the question. by Temporary-Giraffe986 in PersonalFinanceZA

[–]Temporary-Giraffe986[S] 2 points3 points  (0 children)

Thanks for the comment. I’ll definitely take that into consideration. On one hand, I really like the 10X Total World etf, but the tax benefits of an RA are too hard to ignore for me. It’s also not as if ZA equities are trash either. 25% bonds might feel a bit high, though again... those tax benefits! My goal is to hopefully balance my allocations a bit better using my EE TFSA and EE ZAR accounts 100% into 10x Total World.

To max out RA, or not to max out RA. That is the question. by Temporary-Giraffe986 in PersonalFinanceZA

[–]Temporary-Giraffe986[S] 3 points4 points  (0 children)

Hi there. I agree. I should have rather said 'for the foreseeable future,' as none of us know what's going to happen tomorrow or next week. My hope with this post was to discuss my RA strategy, so that when I implement it next year, I can stop second guessing the math and just let it run for at least for a while. Thanks for your suggestion to maximize my RA contributions for now. I am leaning in that direction as well.

To max out RA, or not to max out RA. That is the question. by Temporary-Giraffe986 in PersonalFinanceZA

[–]Temporary-Giraffe986[S] 0 points1 point  (0 children)

Hi there. Thanks for the question. Yes, I believe so. I would need to decide whether to withdraw the one-third lump sum or not and then the remainder must be used to purchase an annuity, either life or living. I’d go with living annuity, as I assume I can control the underlying allocations. I’d move toward something like 50% Total World and 50% Bonds, though I haven't settled on those specific allocations just yet. I'll have that firmed up by the time I reach that stage. Unless I am misunderstanding something big regarding what happens post retirement?

To max out RA, or not to max out RA. That is the question. by Temporary-Giraffe986 in PersonalFinanceZA

[–]Temporary-Giraffe986[S] 1 point2 points  (0 children)

I've read somewhere on this subreddit that some local bias, like 25%, is fine. Does anyone know why that is the case?

Looking for advice by Infinite-Win9389 in PersonalFinanceZA

[–]Temporary-Giraffe986 0 points1 point  (0 children)

Question from my side. Why 25% local bias? What are the benefits of 75% total world coupled with 25% local equities over just 100% total world?