PREPARING FOR RETIREMENT is more than planning the financial aspects; it also includes planning for what life may bring during retirement. No one knows for sure what their mental, psychological, social or physical life will be during retirement and such uncertainty can be deterring.
Given the provisions of national pension reform, fewer people are opting to stop working completely.
Some who may have considered retiring from work fully and early in the past are tending to continue to work but in positions which are less demanding mentally, physically or time-wise.
So, most retirees start their full retirement at 60 years old or later. Thus, the aspect of the ageing process has a significant impact on the retirement process. Because of the vagaries of ageing, retirees have no guarantees of how long their mental faculties, physical flexibility and general good health – including emotional and psychological health – will endure.
Although there is an apparent familial link, it seems like anyone may suffer from Alzheimer’s disease and/or dementia at earlier and earlier stages of life nowadays.
So any retirement plan should include setting out the retiree’s plans and wishes should good health or mental capacities fade at any time. Key aspects of such planning would include identifying assets owned and detailing wishes for the distribution of assets among planned inheritors, details of wishes for health care should the retiree become incapacitated to make such decisions for himself, and similarly identifying someone to act as his power of attorney on financial matters should he be in such a state that he cannot make decisions for himself.
A good start would be to prepare a list of all assets owned, including identifying reference numbers and locations. Note any outstanding liabilities associated with each asset. Consideration as to who would be the inheritors of which assets would then be done more specifically, forming the basis of an estate plan. Another important consideration is the choice of executor(s) to oversee the disposal of assets as set out in the will.
The advice of a qualified estate planner may then be sought particularly for complex estates. If the retiree owns a business, especially a sole proprietorship, much thought must go into identifying and attracting a successor or a buyer for the business.
Identifying specific beneficiaries for bank accounts, pension plans or insurance policies avoids the delay of the probate process. Where the retiree has made up his mind, he can proceed to name such beneficiaries.
Yet, life takes unusual turns; so, where the retiree wishes to maintain the flexibility of changing his choice of beneficiaries in short order, it may be better to name the beneficiary for such assets as the estate on the bank account, pension plan or insurance policy. Then, the retiree can specify the beneficiary in his will, which may be reviewed and changed more readily.
The next planning step recommended is to identify someone who will act as power of attorney on the retiree’s behalf with regard to health care and living will wishes, and similarly someone to act as power of attorney with regards to all financial matters.
The authority of the power of attorney will be triggered by a medical diagnosis of the retiree’s incapacity to make the related decisions. The power of attorney has no power after the retiree’s death. At death, the estate plan takes effect.
Retirement planning includes thinking through this life’s process and preparing for it whilst still in good physical, mental and emotional health. It is an integral part of a retirement plan.
Such planning may take a number of years, so it is important to settle such important decisions before overall health, memory, reasoning or judgement fails.
• Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances. Email: Louisefairsave @nationnews.com This column is sponsored by the Barbados Workers’ Union Co-op Credit Union Ltd.