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I’m 75 with no pension. How can I invest R750k to generate income?

Investment plans have to be carefully customised to each investor’s specific requirements.

I am 75 years old and recently sold my house and vacant land. I do not have a pension and have the money in Nedbank and Absa, basically immediately available. 

The problem is the low interest rate and I also lost my part-time job. I now have to live off the interest and I’m burning cash. The amount in the account is about R750 000. My wife has money in Stanlib unit trusts and I wonder about the future yield of this vehicle. What would you suggest, please?

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Dear Reader,

Thank you for the question.

I am sorry to hear that you, like many others in SA, have lost your source of income and are now required to live off your capital.

It is quite difficult to provide advice without having further detailed information on your personal circumstances such as the following:

  • Does your wife work?
  • If she works, how much does she earn?
  • What is the value of her unit trust investment with Stanlib and in which Stanlib fund/s is she invested? (Stanlib has 31 different unit trust funds)
  • What are your monthly expenses?

Financial/investment plans have to be carefully customised to each investor’s specific requirements based on their own particular needs and the circumstances they find themselves in.

I would therefore suggest that you consider consulting a licensed investment advisor/financial planner (consider a financial planner who is a qualified Certified Financial Planner) who would be able to provide a more detailed solution than this space allows me to.

Based purely on the details provided, my advice is as follows:

  1. I would advise that you and your wife consider applying for the state old-age pension if you have not done so already.
  2. On an amount of R750 000 one should not draw more than the growth of the capital allows, which means if the capital is invested in a bank savings account where the interest might only be about 1.3% then this would equate to R9 750 per year or R812.50 per month. This, as you pointed out in your question, is not a long-term solution.
  3. You could consider a different kind of bank account such as a 24-hour call account that is offered by certain specialist banks, which can offer around 5.3% nominal interest per year (this would be able to provide R39 750 per year or R3 312 per month with no risk to the capital). This solution could be a step to place the capital into while looking for a permanent solution considering the interest is higher than a savings account and the capital is protected from financial market volatility (please be aware that in the current economic environment we must expect further interest rate cuts).

I realise this is not the solution you may have been looking for, but without further details, it would be unfair of me to simply provide you with a glib answer that would in the long run not be in your best interest.

Good luck, keep safe, keep healthy.

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