Planning for your Retirement

Jun 14, 2023 | Uncategorised

This is such an important and exciting phase of your life and comes much sooner than you may expect. Thorough planning is the key to a successful and happy retirement.

If you are 50+ or nearing retirement and not sure what the future may hold, it is worth taking a pause and allocating some time to reflect on:

  • What kind of retirement you want
  • The lifestyle you choose
  • Do you want to be near your family and friends?
  • Do you want to continue with your favorite pastimes or hobbies?
  • Your health and life expectancy
  • How much money will you need to retire comfortably?

Here are some guidelines to consider leading up to your retirement:

  • It is important to have a conversation about retirement expectations and dreams with your significant other.
  • Revisit your financial position regularly and see how you are progressing towards achieving your savings goals and sources of income after retirement.
  • Consider large expenses before retirement, e.g., a new car or children’s study fees.
  • Confirm the retirement age at your place of employment.
  • Compile a budget showing what it would look like after retirement.
  • Find out if you qualify for an offshore pension or state old-age pension; this depends on your assets and level of income.
  • If your employer provides life and disability cover, would you still need cover after retirement? If so, you can continue the cover you currently have in your personal capacity; this is known as a conversion option.
  • If necessary, consider options available for additional sources of income. Could your employer extend your employment on a contract basis? Possibly consider a second career.
  • Does your employer offer a medical aid subsidy after retirement?
  • Do you have dependents living with you e.g., children? Would they have left home by the time you retire?
  • Keep updated records of all your important personal information (your Will, assets, account numbers, financial advisor etc), and keep all your most important documents on hand with information on where to find the original documentation. You can request a Personal Information Document either in electronic form or printed version from your Trust Officer to simplify this task.
  • It is worth exploring retirement villages long before you retire. The waiting list can be as long as 10 to 15 years at some retirement villages. Consider what would be suit you best: Freehold, Sectional Title or Life Right.
  • Declutter long before you move into your new home.

On the subject of decluttering …

The concept of decluttering can seem a bit overwhelming  ̶ thinking of those three dinner services from when the in-laws themselves retired, the silver fish cutlery used once, and the books that might (or might not) interest anyone else!

Help is at hand and this process does not have to be tackled alone.  There are several practitioners who specialise in helping people declutter, sort, pack, sell, move, and even unpack at the other end.  They know buyers who will take certain items, some taking everyday furniture, others buying jewelry, or antiques, or artworks, and even knickknacks. And they know charities that will collect donations, if necessary.   There are other avenues that they might use too, such as Facebook Marketplace or auction houses.

Depending on the type of help required, these practitioners might charge by the hour, and they usually take a commission on the goods that they sell on behalf of the client. This commission would be on top of the auction house commission  ̶ but still worthwhile having someone manage the process.

In Cape Town we know of several such practitioners, who have worked alongside different clients to help them downsize and declutter. The feedback has always been positive   ̶ helping to avoid that last minute feeling of wanting to just dump the last of too many things!

If you would like more information about these practitioners, please contact one of our Wellness Liaison team members, Susan Gardiner, or Toni Tickton on 021 689 8975.

Choosing your retirement home – Freehold, Sectional Title or Life Right?

What are the major differences between these options and what are the main points to consider before making this important decision?

Freehold or outright ownership entails the transfer of full ownership rights, which includes the building and the land on which the property is built on.

Sectional Title entails separate ownership of sections or separate units within a development. You acquire a section or sections and an undivided share in the common property, which are collectively known as units. Most of the modern retirement villages fall into this category and are made up of mini subtype houses or living units, governed by a Body Corporate.

By entering into a so called Life Right Agreement, one only acquires the right to reside in a unit for the remainder of your lifetime or until such time as you move out of the unit. This Right can usually be transferred to your surviving spouse upon your death but will fall away upon the death of the last-dying spouse.

The pros and cons of the three options in relation to each other:

  • Freedom and independence: Unlike Freehold or outright ownership where the owner is in complete control, can make improvements to the property, and is financially responsible for the property in its entirety, the holder of a Sectional Title unit only owns part of a scheme and will need to comply with the management and conduct rules as laid out by the Body Corporate. The owner of a Life Right is equally restricted. The flip side of the coin is that one may prefer to relinquish your independence in favour of communal living when looking to downscale.
  • The Body Corporate “majority rules”: The rules and regulations of any particular retirement village may change, and Sectional Title or Life Right owners may not agree with these changes. As a sectional title owner, you will further be liable for the debt of the Body Corporate. It is thus important to ascertain whether the scheme is being well managed and that the financial statements of the Body Corporate are all in order before you buy into it.
  • Security: Most Life Right complexes and Sectional Title developments have excellent security and access control which is included in the monthly levies and living in a communal environment, near your neighbours, further ads to personal security. Owners of Freehold properties, on the other hand, are entirely responsible for their own security.
  • Affordability: Unlike Freehold properties, where the owners carry the sole financial burden of paying for their own home insurance and the upkeep of their homes and grounds, owners of Sectional Title units and Life Rights pay a monthly levy. Most levies include insurance premiums, maintenance of the common property, wages and salaries of maintenance staff and security. Generally speaking, a Sectional Title unit or Life Right unit within a complex is, in most instances, more affordable than a Freehold property.

The Life Right option, unlike Freehold or Sectional Title ownership, should never be regarded as a property investment. Neither the purchaser nor his or her Estate will benefit financially from the transaction. You basically get out what you have paid for the Life Right, less any reasonable costs associated with restoring the property to the state that it was in when you took occupation thereof.

It is worth noting that Life Right developments are strictly governed and regulated by the Housing Development Schemes for Retired Persons Act 65 of 1988. This act goes a long way towards protecting the rights of retired individuals buying into complexes and retirement villages.  A developer must adhere to these strict regulations which include the registration of a Section 21 Company with a Memorandum of Incorporation, detailing how the Life Right scheme will be run. The developer is also obliged to obtain an architect’s certificate declaring that the building is fit for its purpose. The Life Right Agreement between the developer and the occupant must also specify the estimated levies for a period of 24 months in advance and the fact that prospective occupant knows and understands his or her rights and is fully aware of what he or she could recover if the Life Right comes to an end must be recorded.

It is quite important to discuss the various options available to you with your Trust Officer, who will assist you in making an informed decision.