Retirement planning through the lens of a woman
As I write this article, South Africans would be we paying tribute to the more than 20 000 women who marched to the Union Buildings on 9 August 1956 in protest against the extension of Pass Laws to women. These women had a vision, which resulted in favourable outcomes for current and future generations.
Retirement is all about planning for your golden years and because women tend to live longer than men, they generally need to save more. Women have a longer life expectancy, which means there are more years in which they need to draw income from their retirement savings. If you are a woman (or a man) there is a typical pathway and readiness that we need to be aware of; as we venture into the twilight of our lives.
If you’re physically healthy and financially prepared, your retirement could last for decades. It may go through several distinct phases during that time, with changing income and expense levels that require different budgeting approaches.
Amy Fontinelle; a financial journalist and personal finance expert designed a four-phase model for retirement which consists of pre-retirement, the early period of retirement, middle retirement and late retirement.
Let’s examine attributes of each phase
Early period of retirement (age 52 to 60): This is also known as peri-retirement. In this phase you are still working, but retirement is approaching and you are finally getting a clear picture of what your nest egg, income and expenses will look like.
The next phase is the early period of retirement (ages 62 to 70): Some of the most significant changes in your budget will occur when you first retire. In this phase you will no longer receive a steady paycheque.
And then there’s the middle retirement phase (ages 70 to 80): At this stage, you could see your expenses go down.
Finally the late retirement phase (ages 80 and Up). You will likely face increased healthcare costs because medical spending tends to be highest at that time of life.
You may want to travel less and stay home more, or your travel might be centered on less expensive trips to visit grandchildren and other friends or family. With luck, your kids are established enough in their careers that they no longer turn to you for money. Also, you may not need life insurance (or as much of it) anymore.
At later retirement phase, you might have additional expenses if you move to an independent or assisted living facility or if you need to move to a nursing home or hire a home health assistant.Aside from a possible increase in healthcare costs, your other expenses could be similar in late retirement to what they were in middle retirement. If you cannot afford assistance, you may want to speak to a family member about potentially living with them.
If you are financially secure when you retire, spending your money on a lavish trip or buying a high-value item can be tempting. Still, it is essential to remember that your retirement kitty needs to stretch, possibly a long time. You may want to protect your retirement funds by balancing the more expensive activities you want to spend time and money on; with inexpensive or free ones.
Depending on the cost of living where you currently reside versus where you are headed, moving could be an advantage to your financial situation, or a major belt tightening environment.
Whether you are single, married, raising children, recently graduated or nearing retirement, you need to take control of your retirement planning now.
Created by: Sydney Sekese, CFP® professional and member of the Financial Planning Institute
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