The pitfalls of a joint retirement plan

A4BMost of us have aspirations to stop working one day and retire with all the comforts life has to offer.

If you would also like to retire sooner rather than later and with a defined amount of working years left, there is no better time to review your retirement plan than now.

Although we’ve covered this topic before, we have yet to consider the impact of a joint retirement plan between couples. Here are some important aspects to consider.

Divorce rates in SA

Sadly, divorce seems to be the norm, not the exception these days. The stats show that 50% of marriages fail in South Africa. When this happens, both parties are at risk, so it’s critical that any financial plan is structured in the most mutually beneficial way. It’s a well-known fact that a contested divorce destroys the value of the joint estate and both parties lose out.

With the correct financial planning in place, you can avoid this loss of value.

Your marital regime

Your choice of marital regime will largely determine the division, if any, of the existing retirement provision should a marriage fail. In South Africa, the following regimes exist:

  1. Marriage in community of property
  2. Marriage out of community of property, which offers two options:
    • With the application of the accrual system
    • Without the application of the accrual system.

Understanding the advantages and disadvantages of each option is critical and should be discussed in depth with your financial advisor.

Financial independence

Achieving financial independence, even within a marriage or long-term partnership, is critical in South Africa where government social programmes and grants do not provide an adequate safety net.

The above is a superficial overview because the topic is extremely complex. Please give FPM a call should you wish to discuss in detail any concerns you may have.

Sean A3Sean Fahy
Investment Advisor

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.