MONEY
GET REAL ABOUT RETIREMENT: THE CHANGING ROLE OF BENEFICIARIES COPY: TWANÉ WESSELS, PRODUCT ACTUARY, JUST SA
when asked who they would turn to for
communication flow between
financial assistance should they run
retirees and their beneficiaries,
istorically, the ability to leave
out of money in future, they say that
usually their children. If the next
capital to dependents was
children and grandchildren remain the
generation are the ones expected
a primary consideration of
first port of call.
to help, it makes more sense for
H
retirement planning. However, new research shows that this is becoming gradually less important. Of foremost concern to retirees is that their retirement money should last (at least)
This presents an opportune time to shift the conversation about the role of beneficiaries in retirement planning. Instead of putting the thought of leaving money to beneficiaries as a
them to play a proactive role in the retirement planning process from the start, rather than being caught on the back foot later. Their views on financial planning may also be more up to date, which could assist in dissolving any
as long as they do
key focus, advisers
distrust or uncertainty surrounding
and cover their
could rather
new-generation annuity products.
monthly expenses.
propose involving
This would in turn help advisers
those would-be
propose better retirement choices
beneficiaries in the
for their clients, enabling them to
This growing trend may be attributed in part to an increased longevity awareness. The simple truth is that many retirees are living longer than they anticipated and thought to save for.
decision-making stages of retirement
reduce their risk of running out of money too soon.
planning. This should help to mitigate any unforeseen changes in their role as a beneficiary to that of a provider.
For example, most recent longevity
AN INCOME LEGACY Many people still want to be able to leave a legacy for their children or grandchildren, which is why
figures in South Africa suggest that a
A TRADE-OFF IS INEVITABLE
historically many retirees opted for a
female aged 65 will live to 87. What
As in life, there will always be certain
living annuity over a life annuity. But
this really means is that 50% of
trade-offs in retirement. In the
it is worth noting that life annuities
women will die by this age, but the
case of beneficiaries, it exists in the
have evolved. Retirees are now able
remaining 50% will live on. And with
compromise between running out of
to provide for dependents on death
10% likely to live to 100, it makes
money and having to rely on heirs or
with optional benefit add-ons, which
sense for advisers to work off a much
having a guaranteed income to cover
provide an ongoing income to the
longer planning horizon.
a retiree for life. What is critical is that
surviving spouse, or to dependents for
beneficiaries also understand the risks
a period of up to 20 years.
Key findings from Just Retirement Insights 2020 offer another telling
in retirement for their parents, so that
sign of the mind shift around the role
they are able to manage their own risks
a blended annuity offers the best of
of beneficiaries. Findings indicate
accordingly, should things not work
both worlds. A portion within a living
that two thirds of the pre-retirees and
out as planned for the retiree.
annuity serves as an insurance-based
retirees surveyed have been financially
For those who want added comfort,
guaranteed life annuity to provide a secure income for life, while the
half have had to source alternative
AN OPEN COMMUNICATION FLOW IS KEY
means of income or make special
The findings demonstrate the
higher future income, which could
arrangements to meet payments. But
importance of creating an open
serve as a financial legacy.
affected by the pandemic. Of these,
remainder provides the potential for
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