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When you retire, you and your spouse are no doubt looking forward to spending many happy years enjoying all the things you never got around to doing during your working years. But what happens if your wife or your husband unexpectedly dies? Are you financially prepared for what could turn out to be 20 years or even longer living on your own?

A recent ‘Life Surprises’ survey by Sanlam, conducted among South Africans over the age of 50, found that just less than a third (28.2%) of respondents expect to outlive their partner, with 51.1% of these expecting to outlive them by a minimum of five years.

“Outliving your partner can carry with it a big financial burden and should form a key part of every financial planning exercise from both partners’ perspectives,” says Karin Muller, head of Growth Market Solutions at Sanlam. “What provision has been made for the surviving spouse is a conversation which may be uncomfortable, but both partners need to understand what the financial implications will be if one of them should die,” she says.

Muller says there is a wide spectrum of factors to be considered. Firstly, plans need to be made for the immediate financial impact of a partner’s death, and secondly, a strategy needs to be drawn up for the financial security of the remaining partner over the long term.

“A crucial aspect of estate planning is ensuring that there is enough cash available to pay off debt and cover expenses in the case of the death of one partner. It has been estimated that 65% of deceased estates in South Africa are short of cash. Money is often tied up in various assets, and the remaining partner may end up with a cash-flow problem until the estate is wound up,” she says.

The Sanlam ‘Life ‘Surprises’ survey revealed that just over a fifth (21.4%) of the respondents who expect to outlive their partners, anticipate that they will outlive them by between five and 10 years. 29.7% say they expect to live for more than 10 years after their partner dies.

“You may, however, outlive your partner by 20 years or more, and it is therefore crucial that proper financial planning is done to ensure that you are adequately taken care of financially. For example, if you receive a lump sum after your partner’s death, how can this be best structured to ensure an income for the next 20 years?”

When buying your pension annuity, it is important not to select a package that would give the surviving partner the lowest pension even if you are on a tight budget. Expenses tend to increase over time and need to be anticipated.

How a will is structured may also have a significant impact on the financial position of the surviving spouse. People sometimes do not provide specifically for their surviving partner in their wills, leaving the main assets to their children, and what is left to the spouse, which is often not enough. Clive Hill, Legal Adviser at Sanlam Trust, says that this could open the estate to a claim under the Maintenance of Surviving Spouses Act. And for those not married, there is no such thing as a common-law spouse, and merely living together does not automatically give you rights to your deceased partner’s estate.

Jaco Coetzee, general manager of Sanlam Financial Advisers, says it is not only the possible death of the breadwinner that needs to be taken into account in financial planning. “The death of a partner who is not the breadwinner can also has considerable financial consequences for the remaining spouse, especially if the couple has smaller children. Besides funeral expenses, the remaining parent may have to pay for daycare, for example,” he says.

Muller says both partners need to work with a professional financial adviser to draw up holistic financial plans for three scenarios: either you dying before your partner or your partner dying before you or both pass away. “This needs to happen both before, and after retirement. Even if only one partner had in the past assumed responsibility for a couple’s financial affairs, it is crucial that both understand the full picture to ensure financial peace of mind for the remaining partner in the case of death,” she concludes.

BOX – summary of key findings

  • 78.5% of people claim to have had unexpected life events (good or bad) in either their own lives or that of a member of their family.
  • Just less than a third of the sample (28.2%)expect to outlive their partners.
  • Of those who expect to outlive their partner, the majority (35.0%) are uncertain about how many years longer they will live, but just over a fifth (21.4%) expect to outlive them by between five and 10 years and 29.7% say they expect to live for more than 10 years after their partner dies.
  • Over half expect to live well into their 80s but only 1.3% of believe they will live to be over 120.
  • Most expect to die of old age (46%) or illness (13.8%).
  • Half the sample (49.5%) reported a death in the family as being the event that has had the biggest emotional impact on them.
  • 97.2% of those that lost savings or pension savings rated this event as having a devastating or high financial impact, whereas 93.7 % of people that faced the closure of their own business rated the financial impact as being devastating or high. 89.2% of people that lost their income or were retrenched rated this as having a devastating or high financial impact.
  • People find themselves largely unprepared for the financial impact of these events.
  • 40.5% currently support a family member that they were not expecting to support. Grandchildren (44%), children (43.6%), extended family members (20.2%), parents (12.8%) and spouses (11.1%) are cited most as having to be unexpectedly supported.
  • Respondents have many financial regrets - 74.3% of the people surveyed would change something in their financial preparation and 82.3% wished that they had done more to be better financially prepared for life.
  • Things that they would change: to save more of their earnings (54%), start saving for retirement earlier (47.5%), provide for unexpected life events (43.7%), spend less (42.6%)and get advice from a financial planner (14.3%).
  • Over a third of the sample (31.7%) got their financial advice from a financial planner, but 28.5% did their own research and planning, and 23.2% got advice from their parents or no-one (21%).
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