THE QUESTIONS YOU NEED TO ASK BEFORE YOU RETIRE

There’s a moment in every career when you should stop asking, “How much have I saved for my retirement?” and start asking, “What now?”.

Retirement isn’t the end of your financial journey; it’s the beginning of a new one. And, while most of us spend decades building up our retirement savings, far fewer take the time to understand how to turn our savings into a reliable income, navigate new tax realities, and properly plan our estate.

According to Siphamandla Buthelezi, Head of Platforms at advisory firm NMG Benefits, this is why people approaching retirement need to ask the right questions. “The ideal time to start putting everything in place is five years before you retire. This enables you to make informed decisions, iron out any admin issues, and understand the impact of your choices.”

Here are the most important questions you should ask your financial adviser:

What happens to my savings? Is it better to opt for a living annuity or a life annuity? Should you take a portion as a lump sum? Each comes with different income options, tax implications, and risks. If you choose a living annuity, you’ll need to decide on a realistic monthly drawdown rate and ensure your investments can keep up with inflation. A life annuity, on the other hand, offers guaranteed income for the rest of your life but comes at the cost of flexibility.

How will fees affect my income? Platform administration, investment management, and advice fees can significantly reduce your net income over time. Every rand spent on fees is a rand that doesn’t support your lifestyle, so you should understand what you’re paying – and whether it’s reasonable.

Are there tax implications? If you’re behind on your taxes, SARS will deduct the outstanding amount from your savings before you receive a cent. In addition, any lump sum you may take is taxed according to a sliding scale, although the first R550,000 is tax-free. Monthly drawdowns from living or life annuities are taxed just like any other income. 

What about medical aid? Unless your employer offers post-retirement medical benefits, your membership ends when your job does. Even if you’re allowed to stay on your company’s scheme, the portion that your employer may have been paying will likely fall away, leaving you to foot the full premium just as your healthcare needs start to increase. Apart from the monthly premium, you also need to plan for gap cover and chronic condition benefits,.

Does my will reflect my wishes? You need to ensure your will is up to date and your beneficiary nominations align with your intentions. If you’re concerned about your future decision-making capacity, you should consider giving someone power of attorney, so they can make financial and healthcare decisions on your behalf. This shouldn’t be given lightly; you need to fully trust the person, and understand what you’re authorising.

Will my lifestyle be sustainable? A good rule of thumb is that your retirement income should equal 75% of your final salary, assuming that major expenses, like bond and car payments, have been settled. This is where a detailed financial and lifestyle audit comes in. You need to map out exactly what your income will be, what your expenses will look like, and whether there are any shortfalls.

Buthelezi notes that retirement isn’t just about stopping work. “It’s about stepping into a new chapter with the confidence that your financial foundation is solid. And this process doesn’t begin the day you stop working. It begins today – with asking the right questions.”