Conversations about retirement and death

Column 1

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

 

Conversations about retirement and death

Retirement is a lot more complicated that many think, and if you do not start years before retirement, it can create a hoard of problems that will impact on you and the people who will benefit from your estate.

Not having a will (last testament) is only the start of the many problems that could befall you and the people who depend on you.

Last week I spoke at Momentum ‘Science of Success” about the planning for retirement and eventual death.

The conference, incidentally, was one of the best I have attended or spoken at over many  years. It was the 7^th Science of Success conference and is available on uTube (https://www.youtube.com/live/qFgCCIDmqX0).

 

Two columns

There are so many issues involved this column comes in two parts. This week and next week.

 

Conversations

To get back to your retirement and eventually death, or your parent’s retirement and eventually death. It is a topic that may sound a bit macabre, but you need to plan for both, It is also two issues that should include in your conversations with your family, and in many cases your partner.

Most people in your family need to be having on-going conversations about retirement and death. Whether you are a retiring parent, a partner, a child or even a grandchild there is a need to have these conversations over a longer term. It is not a one decision chat. If done properly it is ongoing as requirements change from health to financial support.

For example, what happens to your children if you and your partner are both killed in a car accident. Everyone needs to have some idea about what will happen. For example: what happens about financial support and custody of minor children. This may require additional buying life assurance.

The conversations need to be subtle often using others as an example. Most parents on reaching retirement are going to get angry if the terms of how and where they will live in retirement, until death, is dictated by adult children, even if they are to bear some of the load.

The conversation is about what happens at every stage of your retirement life and death.

You also need to know who you can trust, and this includes relatives.

The first and ongoing conversation must be with your partner – you must be on the same page. If you are a male and let masochism dominate all the decisions, it may have a very nasty impact on your partner. And you will probably also need to involve a Financial Sector Conduct Authority-registered financial planner to provide an anchor on many issues.

No two people are the same so don’t model the conversation on what Uncle Bob or your hairdresser did. Everyone differs in assets, in health, in income, in investment risk, in relationships, in where they live, in how they want to live in retirement; and, importantly, in whom they trust from relatives, institutions and financial planners.

 

What to discuss

In this column the subjects are touched as to what should be discussed. It does not provide many answers as the answers will be different for every person. But each issue must be addressed and even spoken about again as circumstances change.

 

Your health

This is probably one of the most important things about retirement. It will dictate how you and your partner will live in retirement; and whether you will be sick for most of your retirement, or suffer from dementia. No one knows how long they will live. You could live for a year or two, you could live on average until 86 if you retire at age 65, or to over 100! One thing is almost certain, if you remain physically and mentally fit you will have a far better and longer retirement. Issues that need to be taken into account, are:

• Medical aid: Membership and option of a medical aid. Latest research shows that many retirees are reducing the options or bailing out because they cannot afford the monthly contributions. And on average 60 percent of require health care spend takes place after age 65. The contribution increases account for a major part of inflation. You need to save extra for this before your retirement (and for above-inflation rates and services increases).

• Debilitating condition: Dementia, Parkinson’s Disease, amnesia or a severe medical disability. The problem with dementia and other mental diseases is that as soon as you lose control of your senses you are no longer covered by a power of attorney you may have given your children. There are two unwieldy ways to side-step this. The SA Law Commission many years ago recommended that a ‘continual power of attorney’ should be allowed by legislation so when this happens the power of attorney will continue. You need to discuss what will happen if you suffer from a mental condition now or in the future.

• Frail care: This can be quite expensive depending on the facility.

 

Financial

• A Will: Also known as a last testament. It is something that must be revised on a regular basis particularly as conditions change, such as children reaching a certain age, a divorce or death. Fail to keep a legal Will means the State will decide on who gets what and payments will be delayed. Your Will must include:

• Legal requirements: It must be signed and dated under the protection of two witnesses, who will not benefit from the will.

• An executor/s: An administrator is required to ensure the conditions of your Will are met, as well as issues such as paying debt and taxes and cancelling contracts. You can negotiate what you pay an executor but use someone who belongs to the Fiduciary Institute of Southern Africa (fisa.net.za). You can appoint more than one executor. Many people appoint a trusted relative and a professional.

• Your beneficiaries: The people to whom you want to leave your assets, from cash to a Chinese vase. Your Will must include how each person or institution (a charity) will benefit and the structure of how they will inherent.

• What can be excluded: If you name the beneficiaries in a document issued by your retirement fund or life assurers the beneficiaries will supercede your Will, the money will be paid out sooner. No executive fees are paid on the assets transferred but they will be subject to taxation, which can be met in different ways.

• A letter of wishes: This is about saying things that are not in your will but your expectations of what will happen on your death. This includes things from being kept on life support through to how you reasoned out your will.

• An emergency fund: You need three to six months of income in an emergency fund ensure you can cover the unexpected while you are alive; and, to pay everything from funeral expenses to taxes to executor fees.

 

Next week’s column will be about: Keeping records; savings; inflation; buying a business; saved too much; your pension choices; planning your estate; bank loans; your retirement lifestyle; in who you trust; and, the rules you must ensure are met.

 

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:

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