Reaching retirement age means that you’ve managed to survive the difficulties of working world and you have now earned the right to some well deserved rest and relaxation.

The likelihood is that you’ve saved up enough in your retirement annuity(RA) or with the help of your employer’s pension or provident fund, and you can look forward to taking a long overdue holiday. But before you book those tickets and pack your bags you might want to make some decisions that will determine whether you can take this holiday every year or not.

At your retirement, three high level questions need to be answered.

Firstly, what income do you need on a monthly basis?A detailed budget is best practice – working through a recent bank statement will uncover what your actual costs are for previous months and will ensure that your values remove bias, giving you a true reflection of cost and income requirements. The impact of tax plays a major part in this as your retirement income is still subject to the tax as if you were still employed.

Secondly, do you need a cash lump sum? As a retiree you may withdraw up to one third of your retirement savings in cash which may be used to settle off debt, buy a new car or fulfill a lifelong dream. The choice is yours. As wonderful as this sounds withdrawing the maximum amount of cash may impact your lifestyle well into your retirement and the lump sum may also be subject to tax.

Lastly, what portion of your retirement do you want to leave behind? Some retirees may be in a fortunate position to be able to leave behind a sum of cash for their beneficiaries upon their passing. Determining what the legacy objective is will allow the financial planner to make provision for this goal.

Once these have been answered your financial planner should help you determine the best type of post-retirement structure for your needs. These are prescribed in legislation as living annuities or life annuity structures. Simply put, living annuities are structured investments which pay a monthly income aligned with legislated constraints while a life annuity is the purchase of income for the rest of ones life from an authorised life insurance company. Each have their pros and cons and will have to be unpacked along with ones individual needs.

Need more advice on this? Get in touch and I will gladly help you or someone you know plan properly for retirement.