Approaching retirement is a significant milestone that requires careful and holistic planning. One of the best ways to ensure nothing is overlooked is to create a retirement checklist. Below are some key items to include on your list as you prepare for this major life transition.
Inventory of assets: Start by compiling a complete inventory of your assets, categorising them by type: retirement funds, business interests, discretionary investments, property, trust assets, and so on. Include their current values, locations, and ownership structures, especially where trusts or companies are involved. This will give you a clear picture of your wealth and help ensure your planning is tax-efficient and aligned with your retirement goals.
Planned retirement date: Have a planned retirement date in mind, but remain flexible. Avoid committing to retirement before confirming that you can afford it. Once you start drawing from your investments, reversing shortfalls is difficult and may require you to take on more investment risk or cut back on spending. Consider a phased approach to retirement, gradually transitioning from full-time work to full-time retirement.
Debt elimination plan: Aim to retire debt-free. List all your current debts and develop a strategy to settle them before retiring. If you have a home loan, assess how best to pay it off without triggering unnecessary tax or depleting your discretionary capital.
Retirement accommodation: Think long-term about your retirement accommodation. While your current home may serve you well now, your needs may change as you age. It’s advisable to secure a place in a retirement facility early, even if you don’t intend to move soon, as waiting lists can be long. Given the costs involved in buying and selling property, plan carefully for future transitions.
Risk cover: Reassess your risk cover needs. Many benefits fall away at retirement, such as capital disability and dread disease cover, but your life cover may still serve a purpose. Before cancelling any life policies, consider their role in providing estate liquidity or cash flow for loved ones while your estate is being administered.
Post-retirement budget: Avoid relying on rules of thumb and instead build a budget based on your actual lifestyle. Identify expenses that will fall away (e.g., bond repayments, insurance premiums, investment contributions) and those that might increase (e.g. medical cover, leisure activities). Factor in changes in costs if you relocate or downsize your home.
Long-term healthcare plan: Healthcare costs are likely to increase faster than inflation, so take a conservative approach when budgeting for medical expenses. Consider high-cost items like prosthetics, hearing aids, and home modifications, which may only be partially covered by medical aid. Ensure you’ve allocated sufficient discretionary funds to cover these possible expenses.
Gap cover: Check the age limits on gap cover policies—many have cut-off ages of 60 or 65. If you qualify, ensure you take out cover before reaching the cut-off, as this cost-effective solution can protect you from significant shortfalls in hospital costs, particularly as you age and your risk of hospitalisation increases.
Capital expenditure: Think ahead about any major capital expenses you may incur during retirement, such as travel, vehicle upgrades, renovations, or helping family members with large costs. These events will impact how your investment portfolio should be structured.
Joint retirement planning: If you’re married or partnered, discuss your retirement vision together. Align your expectations on retirement timing, where you’ll live, and how you plan to spend your time. Disparate views can create tension, so use the years leading up to retirement to reach consensus and create a shared plan.
Multi-generational planning: If you plan to leave a legacy to your children or preserve assets such as a holiday home or business interests, incorporate these goals into your retirement strategy. For instance, a living annuity may be more suitable than a life annuity if passing assets to heirs is a priority. Consider trust structures or succession plans to ensure continuity and protection of family wealth.
Retirement planning involves a host of interrelated decisions, each with long-term consequences. By creating a detailed and tailored checklist in the years leading up to retirement, you can ensure that your financial future is well thought through and that the transition is smooth, secure, and aligned with your vision for the years ahead.
* Tapfuma is a Certified Financial Planner professional at Crue Invest.
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