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Conversation of retirement and death

Column 2

By Bruce Cameron
Co-author to The Ultimate Guide to Retirement in South Africa

What you must discuss about retirement and death

This is the second of two columns that deal with ongoing conversations you must have with your partner and your family to ensure everyone is well prepared for what might happen to you and your family.

Everyone is different so there is no single answer. And any answer you might need now is likely to change in the future.

These two columns are based on a Momentum ‘Science of Success” conference at which I spoke. The topic was about planning for retirement and eventual death. The whole conference is available on uTube (https://www.youtube.com/live/qFgCCIDmqX0).

Last week the column dealt with your health; your will; a letter of wishes; and, an emergency fund.

This week’s column deals with:

Keeping Records: You need a list of all your important financial records. At least two people should know where the following is stored: your Will; your Letter of Wishes; your identity, including your passport, identity card, drivers licence and medical aid membership; codes and pin numbers to access computer records; a full record of all your assets; all your debts (your executor/s will need to pay your debts off your debts from homeloans through to cellphone contracts; recent tax returns; deeds of fixed property ownership, upgrades of property to reduce capital gains tax; existing contracts from a builder; an insurance policy document from dying through to insurance on a repayment schedule on furniture; all details of your pension/s; and, your bank accounts.
Savings: Has enough been saved for retirement. Less than 6% of people retire with sufficient capital. What happens if you are short (another job, assistance from relatives)?
Inflation: Pensioner headline inflation tends to be higher the normal headline inflation. And you get the reverse of compounding returns!

Even ordinary inflation might not be enough (Health costs and administrative prices – rates and taxes, government exclusions and rebates get smaller - inflation lag). How will you deal with it if your pension gets smaller and smaller because of inflation?

Buying a business: Many retirement-businesses go bankrupt because of the lack of skills or backing capital. Money lost, particularly retirement capital, is unlikely to be regained.
Saved too much: Lots of ideas from using the donations tax allowances before death to pay for education of grandchildren and/or donate to a charity.
Advice: A financial adviser (joint or separate for everyone involved). If there is a single thing in this column you don’t fully understand, you need help from a financial planner. First is to ensure the planner is registered, and in what categories with the regulator, the Financial Sector Conduct Authority (fsca.co.za). Depending on the size of your estate you may need the help of a Certified Financial Planner accredited by the Financial Planning Institute.
A pension: How to invest your retirement savings. Your choices include:
Discretionary or compulsory purchase annuities. With a compulsory purchase annuity, accumulated from capital of a retirement fund, you need to consider a guaranteed traditional annuity (which has many choices), an investment linked living annuity (where you take all the risks), or a hybrid of the two;
Risks: Including investment, manager, diversity and cost risk. This accounts for all your investments;
Drawdown rates: A living annuity needs decisions, such as how much you will withdraw to ensure it will pay out until you die (which could 100 or more); and,
This is very important that they are added to all your pension and life assurance assets to reduce taxes and ensure quick payments to dependants. Naming beneficiaries overrides your will.
Structures: Trusts, companies, a retirement annuity. All have significant tax implications.
Bank loans: Both old and new. Beware banks don’t like lending to retirees. They will charge a higher interest rate, or you will be refused a loan.

Your life style

You need to start planning your life style after retirement. You cannot simply say you want to play golf or bowls. You will soon get bored. You need to look at:

Affordability: Can you afford what you want. For example, do you have children, grandchildren living offshore who you like to visit.
Loneliness: This often a problem with older people. Stay close to family and friends.
Work: Continue to work after retirement - even if you don’t need the money.
What happens: What will happen if you or partner dies
Help others: Making your time and/or your money available to others
Where will you live: There are many choices. Here are some of the main choices:
Your current home: Often a good idea if you can afford it.
Downgrade: Sell your house and buy something smaller, For example: a secure flat. But beware there are a lot of costs in selling and buying
A new address: Take care, particularly if you are changing towns or countries. You need to be near your relatives and friends; support services, such as a hospital, doctor, dentist; and, near supporting relatives
A retirement village: What ownership structure: a life right, sectional title, or rental; the costs of the village from the levy and municipal services to the facilities for frail care, sports facilities, meals, security and its geographical position.
A secure estate: Not a retirement village, but an estate with freehold or separate title
A granny flat: Live with your children or another friend or relative

Trustworthy

Be careful about who you trust. This includes relatives and strangers. Take account of:

Excesses: You should be very careful in discussing issues with relatives if they gamble, tell lies, drink too much or takes drugs.
Partners: Beware when a person is financially illiterate. Educate the person.
Alternatives: Considering leaving assets in a beneficiary fund ‘testamentary trust’ (set up in your will) that will be well managed and payments controlled. A testamentary trust can be managed by more responsible relatives and/or a professional. Unlike an inter vivos (living) trust, a testamentary trust is taxed like an individual. It does not have the maximum 45% tax on placed on all inter vivos trusts.
Scams: A major target of scam artists is the elderly; and, the more mentally frail the better. Avoid:
Investing in anything you do understand 100%.
If you must never invest more than five percent of your ‘discretionary’ assets in one investment opportunity.
Stick to your registered financial planner.
Put a message on your phone that you do not answer calls from unknown or unlisted numbers. And don’t!
Be careful of the internet from strange WhatsAp messages through to sites on the internet. Never order anything directly from the internet from people you do not know. Do research first. Cybercrime is the fastest growing scamster crime ranging from massive Crypto-currency and management companies frauds to trying to get your bank account details from swindlers claiming to be your bank to ordering a smart new toy.

Some frauds may not appear to be frauds. For example, property syndications which paid out slightly more than bank rates, but they costs were enormous – often more than 30 percent, with the sellers earning up to 20 percent.

Always check on who you are dealing with. If they are registered with a regulator then check directly that they are – but be aware that many a fraudster pretend to be what they are not, claiming to be part of a properly registered institution. If they are not registered with anyone, avoid them. Always discuss any new ‘guaranteed, sign quickly’ investment with your financial advisers and at least one trusted family member.

Treating customers fairly.

Apply the six principles of Treating Customers Fairly to any product or service. The framework is based on six outcomes. They are:

Customers can be confident they are dealing with firms where TCF is central to the corporate culture
Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly
Customers are provided with clear information and kept appropriately informed before, during and after point of sale
Where advice is given, it is suitable and takes account of customer circumstances
Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect
Customers do not face unreasonable post-sale barriers imposed by firms to change products, switch providers, submit claims or make complaints.

There is a lot more detail on this in the book, The Ultimate Guide to Retirement in South Africa. For more information on how to purchase the book go to Buy Now on the website www.retirementplanning.co.za

https://retirementplanning.co.za/conversations-about-retirement-and-death-col-1/

Disability or retrenchment You could lose retirement benefits - The Ultimate Guide to Retirement in South Africa

Why retiring at 60 could be the most expensive mistake of your life - The Ultimate Guide to Retirement in South Africa

Why a one size fits all retirement plan could be your biggest risk - Ascor® Independent Wealth Managers

Why good intentions won’t save your retirement but this will - Ascor® Independent Wealth Managers

Five retirement mistakes that could cost you your financial freedom - Ascor® Independent Wealth Managers

Share this post

Conversation of retirement and death

Column 2

By Bruce Cameron Co-author to The Ultimate Guide to Retirement in South Africa

What you must discuss about retirement and death

This is the second of two columns that deal with ongoing conversations you must have with your partner and your family to ensure everyone is well prepared for what might happen to you and your family.

Everyone is different so there is no single answer. And any answer you might need now is likely to change in the future.

These two columns are based on a Momentum ‘Science of Success” conference at which I spoke. The topic was about planning for retirement and eventual death. The whole conference is available on uTube (https://www.youtube.com/live/qFgCCIDmqX0).

Last week the column dealt with your health; your will; a letter of wishes; and, an emergency fund.

This week’s column deals with:

Savings: Has enough been saved for retirement. Less than 6% of people retire with sufficient capital. What happens if you are short (another job, assistance from relatives)?

Inflation: Pensioner headline inflation tends to be higher the normal headline inflation. And you get the reverse of compounding returns!

Even ordinary inflation might not be enough (Health costs and administrative prices – rates and taxes, government exclusions and rebates get smaller - inflation lag). How will you deal with it if your pension gets smaller and smaller because of inflation?

Buying a business: Many retirement-businesses go bankrupt because of the lack of skills or backing capital. Money lost, particularly retirement capital, is unlikely to be regained.

Saved too much: Lots of ideas from using the donations tax allowances before death to pay for education of grandchildren and/or donate to a charity.

A pension: How to invest your retirement savings. Your choices include:

Risks: Including investment, manager, diversity and cost risk. This accounts for all your investments;

Drawdown rates: A living annuity needs decisions, such as how much you will withdraw to ensure it will pay out until you die (which could 100 or more); and,

This is very important that they are added to all your pension and life assurance assets to reduce taxes and ensure quick payments to dependants. Naming beneficiaries overrides your will.

Structures: Trusts, companies, a retirement annuity. All have significant tax implications.

Bank loans: Both old and new. Beware banks don’t like lending to retirees. They will charge a higher interest rate, or you will be refused a loan.

Your life style

You need to start planning your life style after retirement. You cannot simply say you want to play golf or bowls. You will soon get bored. You need to look at:

Affordability: Can you afford what you want. For example, do you have children, grandchildren living offshore who you like to visit.

Loneliness: This often a problem with older people. Stay close to family and friends.

Work: Continue to work after retirement - even if you don’t need the money.

What happens: What will happen if you or partner dies

Help others: Making your time and/or your money available to others

Where will you live: There are many choices. Here are some of the main choices:

Your current home: Often a good idea if you can afford it.

Downgrade: Sell your house and buy something smaller, For example: a secure flat. But beware there are a lot of costs in selling and buying

A new address: Take care, particularly if you are changing towns or countries. You need to be near your relatives and friends; support services, such as a hospital, doctor, dentist; and, near supporting relatives

A retirement village: What ownership structure: a life right, sectional title, or rental; the costs of the village from the levy and municipal services to the facilities for frail care, sports facilities, meals, security and its geographical position.

A secure estate: Not a retirement village, but an estate with freehold or separate title

A granny flat: Live with your children or another friend or relative

Trustworthy

Be careful about who you trust. This includes relatives and strangers. Take account of:

Excesses: You should be very careful in discussing issues with relatives if they gamble, tell lies, drink too much or takes drugs.

Partners: Beware when a person is financially illiterate. Educate the person.

Scams: A major target of scam artists is the elderly; and, the more mentally frail the better. Avoid:

Investing in anything you do understand 100%.

If you must never invest more than five percent of your ‘discretionary’ assets in one investment opportunity.

Stick to your registered financial planner.

Put a message on your phone that you do not answer calls from unknown or unlisted numbers. And don’t!

Some frauds may not appear to be frauds. For example, property syndications which paid out slightly more than bank rates, but they costs were enormous – often more than 30 percent, with the sellers earning up to 20 percent.

Treating customers fairly.

Apply the six principles of Treating Customers Fairly to any product or service. The framework is based on six outcomes. They are:

Customers can be confident they are dealing with firms where TCF is central to the corporate culture

Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly

Customers are provided with clear information and kept appropriately informed before, during and after point of sale

Where advice is given, it is suitable and takes account of customer circumstances

Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect

Customers do not face unreasonable post-sale barriers imposed by firms to change products, switch providers, submit claims or make complaints.

There is a lot more detail on this in the book, The Ultimate Guide to Retirement in South Africa. For more information on how to purchase the book go to Buy Now on the website www.retirementplanning.co.za

Read more on this topic here:

https://retirementplanning.co.za/conversations-about-retirement-and-death-col-1/

Disability or retrenchment You could lose retirement benefits - The Ultimate Guide to Retirement in South Africa

Why retiring at 60 could be the most expensive mistake of your life - The Ultimate Guide to Retirement in South Africa

Why a one size fits all retirement plan could be your biggest risk - Ascor® Independent Wealth Managers

Why good intentions won’t save your retirement but this will - Ascor® Independent Wealth Managers

Five retirement mistakes that could cost you your financial freedom - Ascor® Independent Wealth Managers

By Bruce Cameron
Co-author to The Ultimate Guide to Retirement in South Africa