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By Anja van den Berg

You might be looking forward to punching in your card for the very last time, yet, the thought of retiring can be unnerving. Uncertainty about finances and concern about health problems often cause anxiety as people head towards their golden years. Preparation is vital, and here we aim to outline a pre-retirement checklist to ensure that you are on track.

  1. Polish your budget

Upon retirement, your financial situation will almost certainly change. Expenses related to the world of work, such as commuting and professional attire, won’t be a factor. In its place other areas of spending will most probably increase. Some will be lifestyle-driven, such as travelling and leisure. Others will be non-negotiable, like medical expenses. Refine your budget in advance to know where you can splurge a bit and where you should hold back.

Your checklist:

  • Review how much money you have saved for retirement and if that sum aligns with the lifestyle you expect.
  • Decide if you would continue working (be it in your current profession or as an entrepreneur) after retiring.
  • Consider making some small lifestyle changes willingly and early. For example, trade in your fancy wheels for a more affordable vehicle or downsize to a smaller home.
  • Calculate a sustainable income that will last your retirement years by consulting an appropriate retirement planning tool, such as the 10X Living Annuity Calculator. It’s also a good idea to speak to a financial advisor.
  1. Analyse your medical aid and healthcare plan

Stats SA notes that the proportion of older adults, defined as those aged 60 and older, has grown from 7.6% in 2002 to 9.1% in 2020.

South Africa has moved from a country suffering mortalities mostly from infectious diseases (concentrated at younger ages) to scenarios where most deaths are attributable to non-communicable diseases (manifesting at late ages), such as strokes or heart disease.

Fewer than 10% of people can maintain their lifestyle post-retirement and medical scheme membership is often one of the casualties of a post-retirement drop in income.

A good healthcare plan is imperative for a successful – and stress-free – retirement. Healthcare needs and costs usually increase after 55, especially if you or your spouse is a chronic disease patient.

Your checklist:

  • Don’t make assumptions about which conditions your medical aid covers. Talk to your broker to make sure that you are fully informed about the scope of your medical plan.
  1. Decide between a Living Annuity and a Guaranteed Annuity

A crucial decision when approaching retirement is how best to draw an income from your retirement savings. Asavela Gwele, Client Relationship Associate at 10X Investments, defines two main product choices: an insurance-type product called a Guaranteed Annuity, and an investment-type product called a Living Annuity. These products meet different needs so you will need to decide which one is best for you.

Your checklist:

  • Understand the differences between a Guaranteed Annuity and a Living Annuity. The table below summarises the differences between the two product types:

Source: https://businesstech.co.za/news/wealth/481017/one-year-before-retirement-here-is-your-important-checklist/

  • When deciding on a product, consider your personal profile, including:
    • Your health
    • Your age
    • Your life expectancy
    • How much you have saved
    • Your desired income
    • Your appetite for risk
    • The current and projected markets
    • The needs of a financially dependent spouse or loved ones
    • If you want to leave money to heirs

Gwele advises people to not just focus on their financial outlook but to also consider their emotional future. As enticing as the prospect of shedding work responsibilities can seem at first, the reality of having so much free time stretching into the future can quickly feel overwhelming. Some soul-searching and planning can go a long way to reduce the stress of this significant transition and make you feel more confident during your golden years.



Business Tech: https://businesstech.co.za/news/wealth/481017/one-year-before-retirement-here-is-your-important-checklist/

Wealth Associates: https://www.wealthassociates.co.za/your-checklist-a-year-before-retirement/

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