Make sure you have a financial plan when you take off time to raise your family
Women live longer and therefore need more money on retirement than men. Yet statistics show us that women have significantly less savings on retirement than men.
Time off from work affects retirement savings
The role of motherhood, which is so vitally important to the fabric of our society, is the reason many women find themselves more financially vulnerable in their later years.
Mothers tend to stop working in order to raise their children and even if it is just for a short period of time, it has an enormous impact on one’s savings. Even when a mother returns to the workplace, she may choose a less demanding position in order to have a balance between family and work, further reducing her ability to provide for her retirement.
Let’s look at the numbers:
If you contribute 15% of your salary towards your retirement for 35 years, from the age of 25, you should achieve an adequate pension.
If you take off 5 years from age 30, you will get a pension of 80% of this amount, or would need to contribute 3.5% more (18.5%) while working.
If you take off 5 years from age 34, you will get a pension of 85% of the first example, or you would need to 3% more while working. The reason why you will be able to save slightly less than the previous example is because you have a greater lump sum saved by the age of 34, benefiting from compounding growth
If you take off 10 years from age 30, you will get a pension of 65% of the first example, or would need to contribute 8% (23%) while working
Living longer you will need more money to retire
To make matters worse, because women live longer they actually need a larger lump sum on retirement than men. With a guaranteed inflation- linked annuity (a regular income that keeps pace with inflation) a women would not need to save 10% more than her male counterpart to receive the same monthly income. This means that women cannot afford to save just 15% for 35 years, but would need to save 16.5%.
Shared retirement savings on divorce
The pension fund laws were recently changed so that a non- member spouse can now immediately receive a portion of their ex- spouse’s pension fund in the case of a divorce. This is deferred as the “clean break principle”.
While this is aimed at protecting the spouse who has taken time out to raise the children, one should not rely solely on one’s partner to provide for retirement.
Insuring your work
Women always tend to have less insurance cover than men. Stay- at- home mothers may believe that, because they are not earning an income, they do have to insure against the loss of income.
The reality is that as a mother you are providing a very important function for your family. If you were unable to care for your children, your family would have to hire help to fill all those roles in that you normally carry out. Your partner may also want to change to a less stressful position as he would now be the sole caregiver to your children. If you are disabled or become critically ill, your family will have increased medical costs to carry. Also remember that if you are not earning today, you may have plans to re- enter the work force one day and if you are unable to, that will affect your future earnings.
The good news is that, due to better longevity, the cost of life insurance is cheaper for women.
Be your own person
Just because you do not bring in an income or you are not the breadwinner does not mean that you should not have your own financial plan. Put yourself first and speak to a financial advisor to ensure that you are taking care of your own financial needs so that you will never be financially vulnerable.
Article by: Liberty
Monday, May 17, 2010
Protect your children through your Will
Michelle Human: Liberty advisory Services
A testamentary trust is a necessity if you have young dependants
All parents want to protect their children. Unfortunately the time may come when you are no longer here and cannot protect them yourself. Making preparations for such an event does not mean that it will happen, only that if it does, that your children will be taken care of.
Make sure you have a valid will
One of the best ways to protect your children is to make sure that you have a will in place. A will is a simple document, but to make sure that your intentions are carried out it is crucial that you will is drafted correctly so that the executor of your estate knows who will inherit which of your assets.
Use a testamentary trust to provide for minor children
A testamentary trust is one of the most efficient ways to provide for minor children in the event of your death. This trust will only come in effect once you die, as stated in your will.
The trust controls how your funds are spent after your death, according to your wishes. For example, you could dictate that only income is used for daily maintenance and education, but the capital can be distributed once the children reach a certain age.
Choose a right guardian and trustees
A testamentary trust allows you to appoint a guardian who will take care of your children’s daily needs. You also choose the trustees who will manage the funds on behalf of your children.
You need to think carefully about who will make the best trustees. Your children’s guardian may not be the best person to manage their financial affairs. Ideally you want to appoint a trustee that has sound financial knowledge and can manage the estate’s finances to provide for the long- term welfare of your children.
Give instructions for life and retirement policies
In the ordinary course of events, the trustees of a testamentary trust are authorized to take control of the assets in the estate for the benefit of the minor children. But remember: proceeds from life insurance policies that pay directly to minor children, as nominated beneficiaries, and retirement fund benefits are not estate assets.
Unless you authorize the trustees to take control of your life insurance policies and retirement benefits, the trustees will not be able to take control of these monies and administer them in terms of the testamentary trust, even if the guardian agrees to them doing this.
The guardian will then have to open a bank account in the name of the child and the proceeds will be paid into this account, which means that the guardian will have full control over the bank account and how the money is spent.
Life insurance proceeds and retirement fund benefits can form a significant portion of your estate so make sure that your will is correctly worded.
A testamentary trust is a necessity if you have young dependants
All parents want to protect their children. Unfortunately the time may come when you are no longer here and cannot protect them yourself. Making preparations for such an event does not mean that it will happen, only that if it does, that your children will be taken care of.
Make sure you have a valid will
One of the best ways to protect your children is to make sure that you have a will in place. A will is a simple document, but to make sure that your intentions are carried out it is crucial that you will is drafted correctly so that the executor of your estate knows who will inherit which of your assets.
Use a testamentary trust to provide for minor children
A testamentary trust is one of the most efficient ways to provide for minor children in the event of your death. This trust will only come in effect once you die, as stated in your will.
The trust controls how your funds are spent after your death, according to your wishes. For example, you could dictate that only income is used for daily maintenance and education, but the capital can be distributed once the children reach a certain age.
Choose a right guardian and trustees
A testamentary trust allows you to appoint a guardian who will take care of your children’s daily needs. You also choose the trustees who will manage the funds on behalf of your children.
You need to think carefully about who will make the best trustees. Your children’s guardian may not be the best person to manage their financial affairs. Ideally you want to appoint a trustee that has sound financial knowledge and can manage the estate’s finances to provide for the long- term welfare of your children.
Give instructions for life and retirement policies
In the ordinary course of events, the trustees of a testamentary trust are authorized to take control of the assets in the estate for the benefit of the minor children. But remember: proceeds from life insurance policies that pay directly to minor children, as nominated beneficiaries, and retirement fund benefits are not estate assets.
Unless you authorize the trustees to take control of your life insurance policies and retirement benefits, the trustees will not be able to take control of these monies and administer them in terms of the testamentary trust, even if the guardian agrees to them doing this.
The guardian will then have to open a bank account in the name of the child and the proceeds will be paid into this account, which means that the guardian will have full control over the bank account and how the money is spent.
Life insurance proceeds and retirement fund benefits can form a significant portion of your estate so make sure that your will is correctly worded.
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