MONEY
WE A LT H
RISKS FACING RETIREES IN THE COVID-19 ERA BY MICHAEL PRINSLOO, HEAD: PRODUCTS AT ALEXANDER FORBES
T
he worldwide COVID-19
within each broad category. More
pandemic has cast a
recently there are hybrid options
spotlight on the risks
that combine the best features of
facing those about to retire or
each. A higher starting income
already retired. But no matter
may set you up for low or no
the economic environment,
increases and severe financial
preparing for one’s best possible
hardship later. On the other
retirement takes careful planning
hand, a flexible pension is not
and consideration of the available
guaranteed to last for life, and how
retirement options, as well as the
long your money (or rather level of
risks of each.
income) will last depends on how much income you take, as well
There are three main risks facing retirees:
as the growth of your underlying
• Outliving your retirement
investments. The law allows you to draw a pension of between 2.5% to
savings
17.5% of your money per year, and
• Having your spouse or
a financial adviser can help you
dependents not taken care of
decide how much you can afford to
when you die • Your income does not increase as fast as your expenses.
3. Work out how long you will be much you will need each month.
To deal with these risks, it is of
take each month.
able to pay your bills and how 4. Once you understand your
GET GOOD ADVICE The value of good advice cannot be
no use worrying about things you
financial position, you can start
underestimated, especially at an
cannot control. One needs to focus
planning.
important and often irreversible
on things within your control: you
5. Starting a good habit. Now that
decision point like retirement.
need to manage your expenses
you have a budget and a plan,
It helps you decide which goals
within your budget, choose the
stay on top of your finances
and needs to prioritise, while
best type of annuity for your needs,
by recording your expenses,
understanding your options and
and get good advice.
comparing them to your budget
the costs and benefits of each. This
every time you spend money, and
means you are fully informed to
checking your plan every month.
choose the option that best meets
MANAGING YOUR EXPENSES
your needs. With large financial
We believe there are five simple
decisions to be made, there are
and thus your income needs:
CHOOSING THE BEST TYPE OF ANNUITY (PENSION INCOME) FOR YOUR NEEDS
1. Know where you spend your
There are two broad categories of
You are not a passenger on the
money and what resources you
annuity types – a ‘guaranteed’ or
journey, but the driver.
have. Make lists.
life annuity and a ‘flexible’ or living
steps that can be followed to make sure you understand your expenses
many benefits to playing an active role in your retirement journey.
2. Find out which expenses can be
annuity. Each has its benefits and
This article first appeared on www.
reduced, delayed or stopped.
drawbacks, plus a host of options
moneymarketing.co.za on June 9, 2020
WWW.SILVER DIGEST.CO.ZA
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