10 general rules for a secure retirement for women (Part 1)
These rules apply to both common law and same-gender relationships.
By Wouter Fourie (CFP®)
Wouter Fourie is the CEO of Ascor® Independent Wealth Management. He is past winner of the FPI Financial Planner of the Year competition and the co-author of The Ultimate Guide to Retirement in South Africa and, Secure your retirement.
In recent posts, my fellow director Martin de Kock and I wrote about the fact that many women are being overlooked when it comes to retirement planning.
It would make sense to look at 10 general rules that affect retirement planning for women. These rules apply to both common law and same-gender relationships.
Rule one is understanding your partner’s retirement scheme, and this can be done by starting to get the details of your partner’s employee benefits, which includes their retirement and health benefits. It is important that both parties must acknowledge that knowing these details must not be construed as hostile, but simply to enable both you and your partner to judge the total effect that each one’s plans will have on the other. In addition, don’t rely on being catered for as a “spouse” on your partner’s retirement plan.
Information that will be needed to assist you in understanding their retirement scheme includes the name and type of the scheme, for example, is it a DB (defined benefit) or DC (defined contribution) scheme. If your partner is self-employed, what retirement, disability, and life cover arrangements have been made? Pay particular attention to the benefits of group life insurance, such as benefits you can expect in the event of the death or disability of your spouse. If your loved one is not a member of an occupational scheme, you need to ensure that alternative life assurance risk cover is arranged.
You need to investigate the loss of employee benefits and take note of the rules that apply, should the surviving spouse remarry, as well as any changes in medical aid benefits and contributions. Pay close attention if your spouse is a member of a DB fund, as your pension could be cut by as much as 50% on the death of your spouse.
Rule two is hard to follow, but setting your retirement plans in stone should be a non-negotiable with yourself while the continuation of those plans must be absolute. In the event of you putting your working life on hold to bring up children, contributions toward your retirement funding should be continued. A rule-of-thumb is to write these plans into a marriage agreement even before you get married, preventing you from scrambling to retrieve a position after divorce.
Rule three is to save money all the time, as much as possible. One way to do this is a flexible retirement annuity that permits you to alter or even stop paying contributions without penalties. Unfortunately, shameless financial advisors will attempt to sell you the opposite. Remember, you need a flexible vehicle to manage contributions and when there is no tax advantage because you are not currently working, it is preferable that your partner should then, on your behalf, save additional money for you through something like a collective investment scheme, e.g., a unit trust fund or a tax-free savings account.
Ensuring that you are the beneficiary of life assurance policies taken out on your partner’s life is rule four. It is even better to have the policy ceded to you since it cannot be ceded to anyone else without your permission. Make sure all premiums are up to date and if, say after divorce, your former spouse does not pay the premiums on a ceded policy, make the payments yourself so that the policy does not lapse.
A major contributing factor towards destitution in retirement is spending your retirement savings. Applying rule five, namely, to always preserve your retirement savings, is key. The accumulated retirement savings for both you and your partner consequently apply.
Rules 6-10 are to follow in part 2 of the general rules for a secure retirement.
Please visit www.retirementplanning.co.za for more information on the books “The Ultimate Guide to retirement in South Africa” and “Secure your Retirement”, which was written by Wouter Fourie and his co-author, Bruce Cameron.
This article is based on a section in the top-selling book, The Ultimate Guide to Retirement in South Africa, written by Wouter Fourie and Bruce Cameron. For more information, visit www.retirementplanning.co.za.
This article first appeared on moneyweb.co.za at https://www.moneyweb.co.za/financial-advisor-views/10-general-rules-for-a-secure-retirement-for-women-part-1/
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