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Retirement: Things to consider in the final year before retirement

Many busy executives, or people who are deeply engaged in their work – like CEOs and company directors – suddenly wake up to the fact that they are in the final stretch before retirement.

Time has a way of sneaking up on you.

This is especially evident at this time of the year, when people start saying, with some level of exasperation, that they “cannot believe it is this time of the year already.”

This is also true for retirement. Many busy executives, or people who are deeply engaged in their work – like CEOs and Company Directors – suddenly wake up to the fact that they are in the final stretch before retirement. They then call our office in a panic and ask to see someone urgently.

If you find yourself in that position, in the final year of work before retirement, there are a few pointers to consider.

1. Get independent professional help 

At the risk of sounding self-serving, please get professional and independent help. You have been saving for a long time to reach this point and you will probably never be as wealthy as when you reach retirement, and you have a large lump sum to invest.

Unfortunately, there are a lot of unscrupulous or untrained product salespeople out there who would like to sell you a retirement product, not because it is the best for you and your lifestyle, but because it makes them a commission.

An independent financial advisor can help you navigate all the options, without being beholden to a single product or financial service provider.

2. See it as a process

In our book, The Ultimate Guide to retirement in South Africa, my co-author Bruce Cameron and I start the book by reminding the reader that retirement is not a single-step process.

Once you grasp this, you can take some time in planning different phases of your retirement, without being bullied into making a hasty decision.

For instance, you can retire and draw from your retirement benefits from age 55 if you are in ill health or in certain employment categories. You are also entitled to full tax benefits on your retirement benefits from this age.

At the same time, you may decide to indefinitely delay your retirement funds if you are still gainfully employed, or you have other funds.

The law does not require you to stop funding your retirement savings at a specific age, nor does it force you to buy a retirement policy at any specific age. This will most probably be decided by your employer, who would have stipulated a specific retirement age.

3. Get back at the taxman when you retire

If you are heading to retirement, make sure to get qualified tax advice as well. You are entitled to certain tax rebates at the age of 65 and additional rebates at the age of 75.

Retirees who have reached their mandatory corporate retirement age but are re-employed in an advisory position or on contract can also continue to invest in their retirement fund and gain the tax benefits thereof.

4. Understand your employment benefits

When you reach the final stretch before retirement, make sure to consult with your HR department to understand which benefits are part of your employment.

There are obvious benefits, such as medical aid contributions or matched pension fund contributions, but there may also be other benefits, such as life insurance or allowances for cell phones, travel, and other work-related items that you are likely to lose when you retire.

Many people are caught off guard when they realise how much additional costs land on their personal lap once they retire because they did not realise the company was paying for it, or partially funding it, in the past.

5 .Think of extending your retirement date if possible

You grow your pension the most in the last decade before you retire.

There are many reasons for this. Your funds reach a point where compound growth really starts making a big difference and on a personal level you often have fewer expenses in that period, as dependants leave the home, and you can push more money into your retirement savings.

If you are able to extend that period, you will be amazed at home much your savings can grow.

A certified financial planner and a tax-qualified advisor will be your best help during this last stretch. To get a broad idea of everything you have to consider prior to retirement, have a look at our best-selling book, The Ultimate Guide to Retirement in South Africa, and visit www.retirementplanning.co.za.

ADVISOR PROFILE

Wouter Fourie

Ascor® Independent Wealth Managers

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COMMENTS   1

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I enjoyed reading the article. Though I was not a CEO or in Top Management, I followed many of the points raised in the article.
In my opinion, planning for retirement should take priority 3-5 years, prior to retirement since it can greatly impact on savings and setting goals.
I started planning for retirement before turning 55. My mandatory age for retirement was 60 and its been almost 2 years since then.
I accumulated cash during that period in order to preserve my retirement funding till I turn 63/65.
Compound growth really made a big difference during the period since retiring. To date, the growth is almost R725k from just over R3.2 million. (I moved my funds to 10X and Sygnia, because of their low fees)
I am trying to stretch my financial retirement to 65, but escalating costs is making it extemely difficult. The main culprit is medical aid and utility costs, which is almost 2/3 of monthly expenses. Sadly I may miss that goal by 1.5 years.
I was fortunate to be debt free since before retiring. I purchased my “retirement” vehicle in 2016 and unfortunately had to sell in 2018, due to unforeseen circumstances. This placed a burden on my savings and cost me an additional R250k from my savings to pay for another vehicle. This is my only regret, since planning started. On the bright side, the vehicle I purchased came with a six year maintenance plan.
I guess what I am trying to point out is that you do not have to be a high earner to make sense of financial freedom, irrespective of your level of income.
Having a relatively frugal lifestyle in the years leading to retirement, can be rewarding after retirement.

End of comments.

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