Probably the first and most important task in getting ready for retirement is to get all the paperwork for your investments and pension in order. Before these can be reviewed, you need to have them in apple pie order and complete. Only then will you know exactly how much money you have, as well as where and how it is invested. You will then be able to start piecing together your income plan for retirement. You may say that you have a good idea of how you will invest, but until you actually reach that point where everything is ready to be invested, you don’t know exactly.
It’s a handy idea to have at least one, probably two month’s income saved so that if the investment process is dragged out you and your family can avoid the stress of worrying about when these deals will go through.
Make sure that your income tax affairs are in order to avoid any unnecessary delays at retirement. When you retire from pension, provident or retirement annuity funds, retirement fund administrators will first need to obtain a directive from SARS before they can proceed with moving money from those funds into an instrument that will earn you a pension. If you want to withdraw cash from a retirement fund, the same applies and you will not receive any money if SARS does not give permission first. If you owe tax at that time, SARS will see that as an ideal time to collect whatever is outstanding.
Familiarise yourself with the necessary paperwork relating to the closing of any retirement funds. This will enable you to hand everything in in good time without having to worry about any unnecessary delays. The longer it takes to receive your money, the longer you’ll have to wait to be able to execute on your investment plans.
Something to bear in mind is that when looking at the paperwork related to leaving a retirement fund, you need to make sure to complete every detail required. Retirement fund administrators have an obligation to protect your money and even one unanswered question will cause a delay because it will have to be completed by you before they can release the funds. These delays don’t take too much time to sort out, but it is the unnecessary to-ing and fro-ing of documents which takes time. Rather take more time and be absolutely sure that you have completed the paperwork in full.
If your employer is not paying a portion of your medical aid and you are permitted to remain on the scheme after retirement, it’s a good idea to get the correct costs so that you can see what your medical scheme will cost.Compare this offering with other medical schemes to see if you can get similar benefits at a lower monthly cost. This is serious business as moving to a new scheme may have some tricky consequences if you and/or your spouse have any pre-existing medical conditions.
Some schemes appear to be cheap but this is often because they offer less and it is not easy to thread your way through that complexity. I suggest that if you need to consider another scheme, you get to work on that process right away. There are things like gap cover and medical savings schemes that you will also need to consider. People often say glibly, we’ll take out a cheap hospital plan and then save like maniacs. This may not be enough when you take costs related to chronic medication into account.
From the first day of retirement, your life will change considerably as well as your estate. It is now the best time to also review that estate. Remember that both you and your spouse will have an estate and it is important to be clear on what you have and how you want it disposed of in the event of your death.
It’s quite easy to leave everything to your spouse in the event of you being the first to go because Section 4(Q) of the Estate Duty Act permits donations between spouses that are exempt from estate duty. Hey presto -, that seems easy! While it may appear to be an easy way out for the estate of the first dying, it is no joke for the estate of the survivor. The survivors’ estate gets lumbered with whatever was left in both estates and, I can tell you from personal experience, there is just so much to be dealt with by the heirs and the executors. Tidying up both estates make good sense in that it is another 'brick in the wall’ in creating your better organised new life in retirement. By ‘tidying up’ I mean simplifying things like unwinding complex investments and considering selling properties that require a great deal of time and expense.
Following on from reorganising your estate comes the issue of drafting a new will or wills. It is certainly possible for a couple to have one will between them (also referred to as a mutual will), but it means that when one of the parties passes away, a new document willl need to be drafted.
If each party has their own will, then the plans are laid out at the outset. You should always try to keep your will as simple as possible, and even though things do change from time to time, these changes are usually fairly minor. You can have the same executor for both wills and it’s maybe also a good idea to appoint a backup executor in case the initial nominee passes away unexpectedly. Choosing an executor is a task that requires care. At the time of the first death, it is a good idea if the survivor, or another family member (if the survivor is incompetent) acts as co-executor to ensure that the family has some say in the way the estate is wound up.
Moving house can be very traumatic, so if you intend to do this to coincide with your retirement date, you need to be well prepared. If you have a property to sell, bear in mind that, as things stand at the moment, there are long delays at the Deeds Office so you need to do everything in very good time to avoid any last-minute stress.
And last. but by no means least, you need to hold a function of some kind for your family to mark the day that your life changed. A punctuation point, if you will, so that the family can look back at the pictures and remember that was the day that Mom or Dad or both of them took a back seat and started to take things easy for probably the first time in forty years.
D.L. Crawford CFP ®
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