This edition has emerged from a common phenomenon observed in couples who plan their retirement without the needed attention for their spouses’ pensions. The moment two persons tie the knot, financial planning becomes a crucial part of their lives. However, it is very easy for them in their 20s to let go of retirement planning. The truth is, it can catch even middle-aged couples caught napping. If the couple is seeking to be together in their old age which is the more preferred situation, retirement planning should be done with spouses in mind.
This hinges on the simple reason that they inter-depend on each other and whatever happens to anyone of them directly affects the other. The first recommendation is for the couples to learn a bit more about this. They are well taught in sessions by the author as well as pension companies like United Pensions Trustees (UPT), who have well distinguished themselves in the market.
Couples in Formal Sector Jobs
Though retirement planning could be daunting based on current financial pressures, it is relatively straight forward for people in the formal sector employment due to the mandatory arrangements. If both couples have well paid formal sector jobs, the burden may not be as heavy. However, the burden may bite in situations where only one spouse had that opportunity.
Couples with one spouse unemployed
A lot more intentional efforts are required in situations where one of the couple is unemployed, has a low wage job, self-employed or employed in the informal sector. These group of persons traditionally did not have a formal sector arrangement for pension. Let’s face it, some of us now have pension pots because it is mandatory, and by law our companies took contributions from payroll at source. The group aforementioned don’t have that opportunity. Considering also the fact that retirement planning is now a personal responsibility, it behooves everyone to do something. The fact is, retirement age will come no matter what (except death do part). As we pray and wish to be together as couples even in old age, the demand exists for us to plan retirement with our spouses in mind as life events that affect one extend to the other.
Couples with one Spouse Employed in the Informal Sector
It could probably happen that the one in informal employment is currently bringing in more income than the formally working spouse. However, the tables may quickly turn in retirement when they advance in age and the informal job becomes more exposed to risk. Due to the fact that pension is a function of time, the earlier the couple begin to look at a formal pension arrangement the better
Leaving it too late would mean a more costly arrangement. It would just not be enough for both to depend on the mandatory 1st and 2nd tier of the single formal sector working spouse.
Planning should involve getting a personal pension for the informal sector spouse out of the earnings of the business. A scheme on the market like My Own Pension with United Pension Trustees has proven to serve that purpose. This particular scheme allows individuals to contribute by mobile money. The opportunities are enormous in this space.
The formal sector spouse could do more contributions into a 3rd tier scheme if they still have some allowance on the tax-exempt 3rd tier rate of 16.5%. The couple should also consider contributing a portion of their profit from their business into the 3rd tier.
Another planning option for retirement planning with spouse, is for the couple is to plan a good succession and business continuity for the business. This is needed because the couple may outlive the business to a point where they cannot actively run the business to make it a going concern. The couple should also think of how they can make their business relevant in the face of constantly and rapidly changing business environment. And the fact that the business must live longer than the couple if it can take care of them.
Other Retirement Income options
Of course, there are other investment options including property, family and friends where children feature prominently. There are also investments into regular investment vehicles like mutual funds, shares and other instruments. The couple have to be aware of the specific risks each retirement income option carries. Few people however, have the knowledge and interest to invest in the traditional investment vehicles. If all that is available to the couple is pension contributions, then the they should look at both getting into a scheme.
From the same writer: Retiring Richly: Not Every Investment Can be Pension