Financial independence is important during anyone’s lifetime, at all stages.
By starting to plan for your retirement early in your working life, you can maintain your standard of living in your retirement years. While life partners can provide many things, they should not be relied upon as part of your retirement plan.
Women tend to live longer than men, and since research shows they generally earn less, this means they need to save more, for longer, than their male counterparts.
It is important to familiarise yourself with how you were married and what the terms are should the marriage end in either divorce or death. If you are married in community of property, you and your spouse’s assets will form part of your deceased estate and your spouse will automatically, by law, be entitled to 50% of the combined assets.
You can be married out of community of property with or without the accrual system. Being married without accrual is the easiest system to work with in terms of your will and estate; your assets remain your own and you may deal with your assets as you wish with no claim from your surviving spouse.
Often, a home will be registered in one partner’s name while the other contributes to the bond repayments. If you are not married or are married out of community of property, ensure that you have a written cohabitation agreement. These financial contributions can be difficult to prove if the relationship ends, leaving the one partner with no claim to the property.
Having sufficient planning in place for both parties is always advisable, and each party should have his/her own savings and investments. A tax-free savings account is a great place to start, allowing you to save up to R36 000 a year without paying tax on the growth.
Increasing your contributions to your workplace retirement fund will help you accumulate larger savings for your retirement. To take advantage of the benefits of compound interest and avoid a hefty tax liability, it is also advised to keep your retirement savings invested when changing jobs.
When leaving your employer, a number of tax-free options are available to you, and one should seek financial advice in order to understand which of these is the best choice for you:
– transferring your savings to your new employer’s fund;
– transferring your savings into a retirement annuity fund;
– transferring your savings into a preservation fund; or
– keeping your funds invested within your previous employer’s retirement fund via a paid-up status (not contributing further to the fund).
Each of the options noted has varying implications, such as when you would be able to access the retirement funds either through resignation, dismissal or retirement and whether you are able to continue contributing towards the fund; therefore, each individual would need to seek financial advice from an accredited financial advisor so as to determine which option would best suit his/her needs.
Buhle Langa, certified financial planner at Alexforbes.
*The views expressed here are not necessarily those of IOL or of title sites.
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