Understanding Retirement Plan
By Rosmaire Henry

Have you given any thought to retirement planning for you and your spouse? Retirement planning for a couple is more complex than for individuals.

This is because it is not just about one person but two individuals, perhaps with different earning power and retirement lifestyle plan. These differences must be merged together to become one single objective for both parties. Bear in mind that spouses have a moral obligation to consider the financial impact of their planning decisions on their partner.

Right now, the last thing you and your spouse will want to talk about is what happens to the survivor’s financial security when one of you dies. You would prefer to share dreams of the fun you are going to have spending your retirement saving together. But let’s face it, death is a possibility at any time and both of you need to be financially prepared for it.

Once this tough issue is dealt with and you both can begin to make plans for it, bringing a peace of mind that let you enjoy your retirement that much more. Let us look at how this can be achieved.

Take a financial inventory of all your assets, liabilities and income stream

This is an essential step that couples tend to neglect, so much so, that it is only upon the death of one spouse, that the true financial status of the couple is known.

Start off by seeing what assets are available and the debts that are associated with them. Make a checklist of income that exist now and those that will exist after the death of either spouse. If either spouse has assets in his or her own name, include it in the mix, and factor in whatever life insurance policies you both have with either spouse as the beneficiary.

It may be possible that the results will show that there are insufficient assets or income remaining, either in amount or value, to provide financial security for the surviving spouse. With the results in, determine if there is a need to implement a contingency plan. This can include paying down of debts, purchasing additional insurance coverage, investing in annuities or just carrying out a downsizing of your current lifestyle to reduce expenses.

Choose your benefit option carefully

If you are a member of a Superannuation Fund or Retirement Scheme you will have available to you several options for the purchase of an Annuity on retirement. You will be able to choose an option which allows a survivor’s benefit to be paid to your spouse upon your death. Accepting this benefit generally means the amount of money you receive during your lifetime is reduced, but without it the retirement checks stop coming when you die.

Choosing a single life annuity can still work for you. If you choose the single life annuity over a joint and survivor annuity, you can use some of the extra monthly income to purchase a life insurance. If you die first, the proceeds from the life insurance can be used to buy a lifetime annuity for your spouse. In this way you would have maximized your pension benefit. Bear in mind however that if you purchase life insurance at a late age then the cost for such insurance can be very expensive. It would therefore be wiser to make this purchase before retirement.

Preserve the liquidity of your estate

More often than not, death is usually accompanied by a large amount of unexpected expenses, including funeral expenses, probate cost as well as taxes and debt obligation. It is therefore important that provision is set aside in your planning for access to cash as quickly as possible, to enable the surviving spouse to meet these obligations. If this is not planned for, some surviving spouse may be forced to liquidate assets, which could be a source of future income, in order to take care of these expenses. This does not need to happen if you plan ahead. Using financial vehicles such as insurance or short term investments will ensure that there are sufficient liquid assets to take care of these expenses.

Know your benefit under the National Insurance Scheme (NIS)

Make sure you are aware of your spouse details relating to NIS as you will need this to be able to claim your benefit upon death. Information such as NIS number is an integral part of the data collection for this benefit to be processed. Individuals are entitled to a benefits such as widow’s/widower‘s benefit, along with funeral grants and spousal allowance on retirement.

Protect assets from creditors

If either spouse is currently facing lawsuits or any obligations that could potentially impact on the financial security of the surviving spouse, immediate action needs to be taken minimize or eliminate the negative effect which can occur. One such method is by placing all or some of your assets in trust for the benefit of yourself and or your spouse.

Plan for future health and long term care Expenses As you get older the possibility of increasing health issues are on the horizon for both yourself and your spouse. No retirement plan is complete without taking this into consideration, as well as, the possibility of long term care needs.

Due to the cost to provide health insurance coverage to retirees, most employers do not provide this benefits, others provide it only to the employees and some only do so on a cost-sharing basis. This gap is filled by the various health care options offered by the government such as National Health Fund and pensioners’ health card through the National Insurance Scheme, once you were contributing to same during your working years.

These are all however available to the individual and not to the spouse, therefore where the spouse is not able to access benefits of their own, an alternative needs to be put in place. Couples can create their own medical and long term care plan by using insurance products and other financial saving products to set aside funding for these expenditure.

Get some good advice

You will need qualified professionals to help you to put your plan in place and manage all the activities surrounding it. Do not turn to your family and friends for advice that can get you into trouble. Family and friends most often do not have the skills to help someone plan for the financial aspects of retirement, nor do they always act selflessly when advising loved ones regarding financial issues.

A good adviser can even help you finesse your approach to that doubly awkward money-anddeath conversation you and your spouse need to have. They will also be able to provide an objective, professional guide to walk you through it all of the activities and discussions needed to create your spouse survival plan for retirement.

Rosemarie Henry is a partner in the Retirement and Employee Benefits consulting firm Milestones and Lifestyle Planning Services (http://www.milestoneslifestyle.co m) and may be contacted at info@milestoneslifestyle.com. Copyright © 2010 Milestones and Lifestyle Planning Services All Rights Reserved