If you were one of the lucky ones, you had a primary caregiver or caregivers who ensured you were financially taken care of as a kid and young adult – from nappies to bracers to university. This might have given you the impression that your parents or caregivers have their own finances figured out. But this may not necessarily be the case.
What happens if you find out that your parents or caregiver haven’t made provisions for their golden years? It’s not an easy pill to swallow, however, the fact of the matter is that what’s done is done. There is no way to turn back the clock and the only way is to keep moving forward. While a lack of retirement savings may seem insurmountable, it’s never too late to help lessen the issue.
The first step is to get a concrete understanding and take an inventory of your parents’ current financial situation. This can help you make arrangements to address their needs and indicate whether it’s time to review or create an estate plan. Important information to get is:
· Do they have any investments, and, if so, what kind of investments?
· With which company are those investments held.
· What are the cost of running these investments and how are they performing?
· How long will their investments last?
· What other assets do they currently have, such as bank accounts, property, insurance policies etc.?
You will also want to check on any employee pension funds. It is possible that your parent(s) are unaware of an employee benefits (EB) retirement fund that they have with their current or previous employer. Therefore, this fund may be untouched and still invested and could be a significant contribution to your parents’ retirement plans.
It is also very important to take into consideration medical aid and health care costs. Chronic conditions are likely to arise in your parents’ senior years and, therefore, health care in retirement can become a major expense that only gets more expensive as a person ages. The need for health care becomes particularly problematic if your parents have a limited income or have not saved for retirement. Fortunately, the answer to this is for your parents to become a dependent on your medical aid. Most medical aids in South Africa will allow you to add parents or caregivers onto your medical aid scheme if you can prove that they are financially dependent on you, which can help with cost savings. Like in most cases, if you add your parent as an adult-dependent, they will incur a waiting period of about three months and up to twelve months if the individual has a pre-condition. However, once this waiting period is over, these dependents will have the same level of cover as the main member and have access to the same benefits.
Saving for your parents’ future is complex and is accompanied by various potential snags. For this reason, it is worthwhile to call in some expert help. This means asking a financial planner for help adjusting investments and insurance cover to fit your parents’ individual needs and assisting in creating an estate plan.
Contact us:
Phone: 011 803 9686
Email: vivian@pbafsa.co.za or bev@pbafsa.co.za
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