By Buhle Langa
Financial independence is important during any person’s lifetime, at all stages.
By starting to plan for your retirement early in your working life, you can maintain your standard of living in your retirement years. While having a life partner can be wonderful, he or she should not be considered as a part of your retirement plan as they may not even have saved sufficiently to meet their own requirements.
Women tend to live longer than men, and since research shows they generally earn less, this means that they need to save more, for longer, than their male counterparts.
It is important to familiarise yourself with how you were married and what the terms are should the marriage end either in divorce or death. If you are married in community of property, both you and your spouse’s assets will form part of your deceased estate and your spouse will automatically, by law, be entitled to 50% of the combined assets.
You can be married out of community of property with or without the accrual system. Being married without accrual is the easiest system to work with in your will and estate; your assets remain your own and you may deal with your assets as you wish with no claim from your surviving spouse.
Often, a home will be registered in one partner’s name while the other contributes to the bond repayments. If you are not married or are married out of community of property, ensure that you have a written cohabitation agreement. These financial contributions can be difficult to prove if the relationship ends, leaving the one partner with no claim to the property.
Having sufficient planning in place for both parties is always advisable, and each party should have their own savings and investments. A tax-free savings account is a great place to start, allowing you to save up to R36 000 a year without paying tax on the growth.
Increasing your contributions to your work retirement fund will help you accumulate larger savings for your retirement. To take advantage of the benefits of compound interest and avoid a hefty tax liability, it is also advised to keep your retirement savings invested when changing jobs. When leaving your employer, a number of tax-free options are available to you and one should seek financial advice in order to understand which of these is the best choice for you:
- Transferring your savings to your new employer fund;
- Transferring your savings into a retirement annuity fund;
- Transferring your savings into a preservation fund; or
- Keeping your funds invested within your previous employer’s retirement fund through a paid-up status (not contributing further to the fund).
Each of the options noted have varying implications such as when you would be able to access the retirement funds either through resignation, dismissal or retirement and whether you are able to continue contributing towards the fund, therefore each individual person would need to seek financial advice from an accredited financial advisor so as to determine which option would best suit their individual needs.
Regular consultations with a financial planner will ensure that you are on track for a secure retirement.
Buhle Langa is a Certified Financial Planner at Alexforbes.