Decoding retirement terms

PLANNING: YOUR FINANCIAL FUTURE LIES IN YOUR HANDS – EDUCATE YOURSELF NOW

- Carina Jooste

• From compound interest to two-pot system, there is much to understand.

In 2025, you'll take charge of your retirement savings. Whether you're investing for retirement, or spending your retirement savings, this is your guide to key concepts and terminology. Be empowered to make informed decisions about your financial future.

Asset allocation
This is the process of dividing your investments among different asset classes to balance risk and return.

Asset classes
Retirement products in South Africa typically invest in a diversified range of assets to balance risk and return. Asset classes are broad categories of investments with similar characteristics.

Equities (Stocks): Represent ownership in a company. They offer the potential for high returns, but also higher risk.

Fixed-income (Bonds): Debt securities issued by governments or corporations. They generally offer lower returns but lower risk.

Cash and cash equivalents: Low-risk investments like savings accounts and money market funds.

Real estate: Includes physical property like homes, commercial buildings, and land.

Commodities: Tangible assets like gold, oil and agricultural products.

Compound interest
The interest earned on both the initial principal and the accumulated interest over time.