What to do if your partner’s retirement money isn’t enough

Here are five things you need to do if your partner hasn’t saved sufficiently for your golden years

RETIREMENT is around the corner for you and your life partner and now that you’ve taken a look at what that means financially you’ve discovered your partner’s retirement savings are way too little to take care of you during your so-called golden years. How do you make up the shortfall? This week we offer some basic guidelines on how to make the best of this situation, and to safeguard your relationship against money stress.

1 DO SOMETHING ABOUT IT NÓW

When you’re retired your expenses should ideally be around 75% of what they were before as some costs will come down or fall away. But if you know that during your retirement you’ll also have to support your partner, it makes sense to start cutting back on your lifestyle expenses now.

If you still live in a big family home or drive a big car, you can scale down and use the money you free up to settle debts so you can retire without any debt obligations.

If your debt has been paid off, or you don’t have any, consult a financial planner for advice on effectively investing the money you’ve freed up. You may think a small amount won’t make a difference but every bit helps and compound interest can make your savings grow a lot. Here’s an example of the difference a small amount can make: someone who saves R500 a month for five years at 7% interest, for example, can save about R35 800 (without fees). It will increase to R44 530 after 6 years. If you put away R1 500 a month for 5 years at 6% interest, your savings could grow to R104 000.

You and your partner need to have an honest conversation about your finances. It can be a difficult subject to broach, and including a financial planner in the conversation to provide facts and figures about life expectancy and budget planning will mean the matter can be tackled from a practical planning point of view rather than an emotional one, says Annalise De Meillon Muller of Glacier by Sanlam. Even financial services professionals ask financial planners to help them plan their retirement.

2 RECONSIDER YOUR RETIREMENT DATES

These days it’s no longer odd to keep working into one’s 70s and 80s as people live longer and are healthier thanks to advances in healthcare.

See if it might be possible to postpone retirement for you and your partner so you can save more money. Apart from helping you to save longer, postponing your retirement date also means the period during which you depend only on retirement money will be shorter.

If you can’t stay on at work full time, consider working on a consultant basis, freelance or half day. If you can’t both postpone retirement, consider the option of at least one of you continuing to work so you aren’t retiring at the same time.

3 PLAN ADDITIONAL INCOME

Start planning how you and your partner can supplement your income during retirement. It may surprise you to discover how much you can add to your income based on your experience and skills.

Be careful not to start a new business willy nilly because you can’t afford to lose money at this stage of your life. Also, beware of moneymaking scams, such as Ponzi and pyramid schemes – older people who are close to retirement are soft targets for scammers.

4 FIND OUT HOW MUCH IS AVAILABLE

Retirement fund money is regulated and it’s important to be aware of the amount you will be able to withdraw, how it will be taxed and how much you must reinvest.

Everyone’s tax and retirement fund planning is unique, so talk to a financial planner about what will be most taxeffective for you. If you belong to your company’s retirement fund, your HR department can provide you with all the relevant information. You can also contact the investment company directly or, with your permission, your financial planner can do this on your behalf.

5 BE AWARE THAT INCOME NEEDS WILL CHANGE

Few people take this into account, but during retirement there could be significant changes to your income needs.

In the first 5 to 10 years retirees usually need a little more money because they’re still relatively healthy and can do the things they looked forward to doing, such as art classes or travelling, which cost money.

Later on, expenses usually change as retirees become more likely to stay at home. At this stage they might use less money, and can possibly even save a bit.

Once retirees start becoming frail their medical expenses increase and then they need a bigger monthly income from their retirement savings. You should discuss all of this with a financial planner beforehand and consider investing your money in such a way that you have enough for each phase, Annelise says.

What happens will depend on your health and life expectancy, and remember that the partner who lives longest will still need a retirement income.

TIP

Always compare fees and returns on investment options and get advice from an expert such as a financial planner.

GET HELP HERE

▶ Financial advisers: www.fpi.co.za; www.fia.org.za ▶ Retirement guides and investment information on the websites of investment companies like Sanlam, Old Mutual, 10X Investments, Allan Gray.