Looking Ahead

Poor planning could tarnish your golden years of retirement
By Ruwaydah Lillah

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Watching my grandmother get old, forgetful, frail and ultimately helpless was a terrifying experience that made me wish I never get old. But it’s only now that I’m much older, and seeing my dad through retirement, that I realise just how frightening old age must be for them; more so if they aren’t financially prepared for it.
 
Most of us don’t plan sufficiently for our twilight years. But the good news is that more people are enquiring earlier, between the age of 45 and 50, about retirement accommodation, says Dealtry Pickford, a trustee of the St Leger Retirement Hotel in Muizenberg, Cape Town. “They are seeking to be more informed about the myriad of retirement options on the market today, not only for their parents but also for themselves,” says Dealtry.
 
This is a good start, as some retirement places have a 20-year waiting list.
 
Such is the demand for retirement homes that new developments are springing up everywhere says Marius Brandow, a junior project manager for the Central Development Property Group. Many pensioners are opting for retirement villages. “This does not just make financial sense, but they’re also surrounded by their peers with access to state-of-the-art medical facilities and they know they will not become someone else’s burden when they can’t do things for themselves anymore,” says Brandow.
 
Difficult decisions
 
“If you want to have a peaceful living arrangement in old age, you have to make that firm decision now,” says Elize Potgieter, a social worker who helps place and settle people into the Mooi Hawens Retirement Home in Amanzimtoti, KwaZulu-Natal.
 
Living in your own home and hiring help is an option, but the maintenance of the home and garden will still remain your burden, which you may not be able to afford.
 
“Moving in with the children is another option, but their lifestyles are totally different from yours. You’ll be left alone at home during the day, talking to the cat, dog and the pigeons. When the children come home tired at night, they may want quiet time but socially starved Granny wants to catch up. You’ll feel that you are in the way,” says Potgieter.
 
Buying options
 
If you have some money saved, you could invest in a retirement home. But then you have to understand exactly what you are committing yourself to when you sign the documents. Always ask for the latest balance sheet and other relevant information. If you are in the dark, get legal advice. The options for buying are:
 
Sectional title
You own the unit, registration is done through the Deeds Office by a conveyancer and you may have to pay transfer duty. This could be a good investment that you could leave as an inheritance to your children.
 
Share Block Scheme
You become a shareholder in a company that owns the retirement estate, which entitles you to occupy a cottage or apartment. It’s much cheaper than a sectional title. However, if the company experiences financial difficulty and is liquidated, you may be liable for outstanding debt and you may lose your home.
 
Life Rights or Occupation Rights
This falls under the Housing Development Scheme for Retired Persons Act 65 of 1988. No legal costs are involved. You are entitled to occupy a particular apartment for the rest of your life, but this ownership ends when you pass on. You can’t leave it to family as an inheritance. However, when the property gets sold, you do get a share of it, which will be paid to your estate.
 
Saving for your nest egg
 
The sad reality is that 90 percent of South Africans don’t have enough money saved for retirement. This means that many can’t afford the lifestyle they were accustomed to while they were working and most have to live off the state, family and friends or charity, says Johannesburg-based Liberty Life financial advisor Joe Chitanda.
 
“The sooner you start saving, the sooner you can earn compound interest (interest on your interest), which means a lot more money for a comfortable retirement.”
 
He says company/employer pension products changed from “defined benefit” (which shows exactly how much they’ll have at retirement) to “defined contribution” (which shows exactly how much they’ve contributed). It is up to the employee to make sure you contribute enough. Meet with a financial advisor who can do the necessary projections and tailor a retirement plan specifically for you. Work pension provident contributions are never enough, so also start a Retirement Annuity (RA), advises Chitanda. The money you contribute to the policy is invested and the return you make isn’t taxed in the fund. This policy grows faster than an investment or unit trust.
 
 
10 tips for planning for your (or your parents’) retirement
 
1. Get a full physical to determine your overall health and possible future problems.
 
2. Let a financial advisor calculate how much you’ll need to retire comfortably. Take into consideration inflation as well as unforeseen medical costs.
 
3. If your parents are of retirement age, regular medical check-ups are important. Ensure they are covered by a medical aid, even if it’s a basic hospital plan to ensure they get proper medical care when it’s needed.
 
4. Don’t put all your eggs in one basket when it comes to investing money. Spread out your investments as much as possible.
 
5. Draw up a will with clear instructions on who gets what when you die. Anyone with a sizeable estate should have a will, says Chitanda. Advise an elderly parent to have a will and explain why it’s important.
 
6. Decide when and where you want to retire and also help your parents make an informed decision.
 
7. Research what type of retirement accommodation is available in your preferred area. Look at the type of facilities these institutions offer.
 
8. Make sure that the accommodation you choose either for yourself or your parents has a frail care facility, panic buttons in the rooms and 24-hour medical assistance.
 
9. Don’t just dump your parent there. Ease them into the new environment, visit regularly, take them on outings and holidays and make sure they know you’re just a phone call away.
 
10. Compile your bucket list of things you always wanted to do before you die. Encourage your parent to get a new lease on life and live the remainder of it the way they had always dreamed.

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