Although most of us tend to think of retirement as a joint financial planning process, the reality is that many people, whether through death, divorce, or the choice to stay single, should plan only one retreat.
The unique circumstances and potential challenges faced by those planning for retirement alone require further investigation, which we attempt to do in this article.
Dual-earner couples planning a joint retirement enjoy an important set of benefits that single pre-retirees typically don’t. First, couples (whether they both generate income or not) benefit from shared living costs, including accommodation, charges, fees and taxes, food (to some extent), cleaning and gardening services, Wi-Fi and connectivity, entertainment subscriptions, and maybe even transportation. When both partners generate an income, the couple has the advantage of being able to use both incomes to save for their joint retirement which, again, is likely to include many shared costs. In addition, while dual-earner couples have each other’s income available in the event of job loss, illness or disability, those dependent on a single earner are at greater risk in the years leading up to it. retirement and, as such, risk coverage play an essential role in protecting their retirement savings.
In particular, those considering a single retirement will need to ensure that they are adequately protected against loss of income resulting from ill health or disability in the form of income protection and/or a lump sum disability, bearing in mind that they do not have a spouse’s income to fall back on in the event of a tragedy. They will also need to find a workable and tax-efficient balance between saving through approved retirement fund structures and discretionary investment portfolios to ensure that all of their retirement savings are not compulsory – bearing in mind mind that this can lead to cash flow and liquidity problems during their retirement. years.
The retirement planning industry (including retirement homes and complex promoters) is primarily focused on helping couples visualize, plan and enjoy their retirement together, which can make it harder for a single person to envision and plan what retirement would look like. As retirement planners, it is therefore important that we identify and explore the specific planning needs of those who intend to retire alone or those who find themselves alone in retirement.
When it comes to retirement life, single retirees will need to think about what their housing needs would look like if and when their physical and/or mental health deteriorates. While retired couples must rely on each other for mental or physical illness, singles will need to plan carefully for their incapacity.
In this regard, singles planning for retirement can consider the following:
- Proxy: Without a spouse or life partner, those retiring alone may consider giving power of attorney to a trusted friend or close family member for their affairs, especially as it becomes more physically difficult to care for. business in person. You will need to think carefully about whom to entrust your affairs to and the scope of the mandate you would be comfortable entrusting to them. For example, you might want to give someone a power of attorney to help you specifically with marketing and selling your property, or a mandate to manage your bank account and investments.
- Living will: Without a spouse or life partner to speak on your behalf if you find yourself in critical condition and unable to speak for yourself, consider signing a living will in which you appoint a close friend or family member as your proxy medical. Your medical proxy will be responsible for liaising with your physician(s) to guide them.
- Fragile care or life support: It makes sense for a single person to plan ahead and budget for the costs of assisted living or frail care services later in retirement. Without the help of a spouse or partner, single retirees may need to access assisted living facilities sooner than if they had a partner to help care for them, keeping bear in mind that assisted living facilities and care for fragile people generally come at a huge cost.
- Support Network: Maintaining a reliable and accessible support network is vital for single retirees, especially when they need emergency assistance, logistical assistance or emotional support. Thus, the proximity of your retirement residence to your support network is an important factor in retirement planning.
- Stay engaged: Although retiring couples greatly benefit from each other’s companionship and interaction, those retiring alone should consider how they will remain socially engaged during their retirement years. While many pre-retirees find the stimulation and camaraderie of the workplace sufficient to meet most of their social needs, taking time off from work can leave many single retirees feeling lonely and unstimulated. As such, if you plan to retire alone, think carefully about how you plan to stay socially connected during retirement.
Single retirees also present a particular set of estate planning requirements that retired couples do not face, especially when it comes to distributing their wealth after death. While most couples tend to bequeath their respective assets to each other, single retirees need to think carefully about how their assets will be passed on and to whom. While married couples may benefit from section 4q of the Inheritance Tax Act – which provides that all assets accruing to his surviving spouse on death are deductible from the gross value of his deceased estate and therefore excluded for the purposes of inheritance tax – no such deduction is available to single retirees. As such, reducing inheritance tax will no doubt be an important consideration for single retirees who, fortunately, have several estate planning mechanisms available to reduce these taxes, such as a life annuity structure.
Life annuities can be used effectively to reduce inheritance liability, as the proceeds are not part of the deceased estate, meaning they are not included for purposes of calculating inheritance tax or estate fees. the executor. Unlike life annuities which terminate on the death of the policyholder, when the owner of a life annuity dies, the remaining funds will be distributed to designated beneficiaries. When an annuitant designates beneficiaries of his life annuity, these beneficiaries have the possibility of transferring the life annuity to their name or of taking it in the form of capital.
Documenting and communicating your estate planning and end-of-life wishes to a trusted family member, friend or advisor is important to ensure those closest to you know and respect your wishes. Once you have written your will, make sure someone close to you is (a) aware of its existence and (b) knows where an original copy of the document is. In many cases, the estate administration process is delayed because relatives of the deceased do not know if a will exists or where it can be found.
Remember that dying without a valid will means that your estate will be distributed according to the laws of intestate succession. For example, if you have no spouse or dependents, the surviving parents will inherit by intestate succession. On the other hand, if you have no surviving parents, your siblings will inherit your estate intestate – and if your siblings predeceased you, their descendants will inherit your estate, and so on. It is therefore essential to intentionally structure your will to ensure that the assets of your estate are distributed according to your wishes.
If you’re facing retirement on your own, partnering with a trusted financial advisor will undoubtedly be essential to ensure you have someone with the necessary financial and estate planning skills you can count on to support you. help you through your retirement years.
