1st October marked the International Day of Older Persons. “In South Africa only 6% of South Africans can maintain their standard of living during retirement. The cost of medical care and maintaining your current lifestyle could result in significant financial challenges,” stated Mark Lapedus, Divisional Director for Product Development at Liberty.
While we know all too well that every working person nearing retirement age should be saving for the same financial goals, to replace their income and create a financial buffer for health risks that may eat away at their income, is this the reality?
Liberty claims statistics show that cardiovascular conditions and cancer amount to more than 50% of all claims for elderly people. While respiratory diseases, strokes and urogenital disorders also contribute towards claims for the elderly.
“So if you're nearing retirement or concerned about your financial future, there are two important elements to include in your financial plan,” Lapedus added.
1. Plan to make up for your income loss
According to Liberty most people nearing retirement age save up for a lump sum and forget about a monthly income and planning for the cost of age related ailments.
Lapedus believes that every retirement planning discussion must answer the question, "How much do I spend today?"
He continued, "Your monthly budget before you retire should help you calculate how much you will need to live comfortably and maintain your lifestyle in the future. Your budget helps you to set a benchmark that you can work towards."
The trick is to look for a retirement saving option that is not limited to saving up a lump sum and that guarantees a future income.
"From Liberty’s point of view, this is the need we addressed when we launched the Agile retirement annuity with the Exact Income Fund. With a portion of your savings you can secure an income, regardless of what happens to markets or interest rates. This may only be part of your final solution, but at least it will provide you with some measure of certainty,” Lapedus iterated.
2. Protect yourself from health risks
It is no secret that you older you tend to get the more you spend on medical treatments.
“It is important to plan for the unexpected costs associated with severe illness or permanent impairment from age-related diseases which can deplete your retirement savings faster than you expected,” Lapedus recommended. Further, South Africans should include lifestyle protection in their financial plan as this may help to better manage the cost of medical treatments and recovery, should there be a need.
This is typically where financial advisers have a key role to play. This as they are responsible to assist clients to understand their needs, create peace of mind and a sense of security.
Lapedus encouraged checking in with your accredited Financial Adviser to review your lifestyle protection cover and ensure that your financial plan delivers on your retirement needs.
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