Budget

A budget becomes even more important in retirement. With a realistic budget, you can see if you are living within your financial means and where you are spending your money every month. And with a budget for retirement, you can plan better for life after retirement.

Consider the changes in your lifestyle after retiring, including: will you travel more, need a new car or move to a smaller house? Are your debts paid off, or when will it be paid off? And will your medical aid plan change?

Choosing the right annuity

When they retire, most members use their retirement savings to buy an annuity. Annuity income (or pension) is a regular income you receive during your retirement years.

There are different types of annuities, and when you purchase an annuity to provide an income after retirement, you need to carefully consider how to apply your retirement savings so that you and your loved ones have a sufficient income when you no longer receive a salary.

When deciding on the type of annuity, you have to consider how much flexibility and income certainty you need. Your risk appetite, health and other sources of income are also important factors to consider.

Broadly speaking, there are two categories of annuities, each with their own key features:

A living annuity offers you flexibility to decide how you want to invest your retirement savings and how much income you receive, within certain limits. Your income will stop once the capital is depleted. If you die while there is still a portion of your capital left, it will be paid to your nominated beneficiaries.

A life annuity guarantees you an income for the rest of your life, and you don’t make any investment decisions. Your income will be paid for as long as you live. If you selected a guarantee period and die within that period, that part of the annuity that would have been paid until the end of the guarantee period will be paid to your nominated beneficiaries.

There are various aspects to consider in a holistic financial plan that can give you peace of mind in retirement. Estate planning and tax planning are two of the more complex issues, and your financial adviser should take these factors into account in your financial plan.

It is also important to reassess your choice of cover for medical expenses. As you grow older you may require more chronic medication and more provision for other medical expenses. And make sure you review your risk policies and life insurance to make sure that you have the right cover in place for your circumstances.