Are you in a position to retire early? Perhaps you’re longing for more freedom and to enjoy more leisure time with your family. Or perhaps there have been unforeseen changes in your workplace or family life. Before you jump into early retirement there are a few things you need to consider first.
Annual vs Lump Sum Payout
Many companies in South Africa offer their employees pension funds as part of their benefits packages. You’ve been paying money into your pension fund every month during your career and now you’re ready to retire. Depending on your specific retirement plan, you may be faced with various payout options. Some pension funds may offer you the option of annual payments or the option for a lump sum payment. You will need to sit with your financial adviser in order to decide which option is best for you depending on your financial and lifestyle goals in retirement.
If you are married it is important to plan for the well-being of your spouse in the event of your death. You need to consider the following:
- Income your spouse will need in the event of your passing
- Investments or assets that may support the surviving spouse
When you retire early, money won’t be flowing the same way it was when you were working so it’s important to watch your expenses. One expense that is vital to make provision for is your life insurance policy. In addition to your pension fund and investments, your spouse and children will be well taken care of in the event of your passing.
If you retire early, you are likely not yet eligible for government pension payouts. You may never be eligible at all. The below are the requirements.
- be a South African citizen, permanent resident or refugee
- live in South Africa
- not receive any other social grant for yourself
- not be cared for in a state institution
- not earn more than R86 280 if you are single or R172 560 if married.
- not have assets worth more than 1 227 600 if you are single or R2 455 200 if you are married.
If you have medical aid while you are employed, it is important to make provision for that expense when you retire. As you get older, your health may decline and you need to afford good healthcare, especially in South Africa where public healthcare is not up to standard.
Once you have considered all the above factors, you can decide whether you are ready for early retirement or not. It’s important to remember that, if you choose a pension payout and need the money ASAP, you can apply for pension bridging through our website to get an advance on a portion of your payout.