Common oversights in financial planning: Have you covered all your bases?

Gugs Mhlungu spoke to Certified Financial Planner, Paul Roelofse.

Listen to their conversation in the audio clip below.

How confident are you that you've covered all your bases when it comes to your financial planning?

"We set up a financial plan very deliberately, we go through the numbers, we set our objectives, we put our plans in place but over the years there seem to be some common oversights."

- Paul Roelofse, Certified Financial Planner  

Roelofse outlines some of the common oversights in his latest article:

Beneficiary designation for Pension Fund

One critical area is failing to designate a beneficiary for your pension fund benefits. Trustees typically determine beneficiaries, prioritising dependents. However, navigating complex beneficiary rules and ensuring the desired recipients are accounted for can be challenging.

"In the event of a death, if that isn't in place, the proceeds of the pension/provident fund will go to the estate and that could cause a whole lot of complications in terms of timing and who gets the money at the end of the day and costs as well."

- Paul Roelofse, Certified Financial Planner  

Inclusion of Retirement Annuity contributions in PAYE deductions

Neglecting to include Retirement Annuity (RA) contributions in your Pay-As-You-Earn (PAYE) deductions can affect your take-home pay. Despite the opportunity to boost monthly income, adjusting deductions may require navigating administrative hurdles and understanding tax implications.

"Go to your Human Resources Department and tell them you have a Retirement Annuity, you give them some details about that, and they incorporate that into your PAYE scales which immediately gives you a refund every month in terms of your take-home pay so you don't have to wait till the end of the tax year before you get that refund...so those people who are really struggling along month to month, have a look at your Retirement Annuity fund and go to your HR and tell them to incorporate that and immediately you are going to release extra take-home pay every month."

- Paul Roelofse, Certified Financial Planner  

Nominating a child as a beneficiary

Nominating a child as a beneficiary presents challenges as minors lack the legal capacity for financial matters. Policies involving minors often involve legal guardians, introducing complexities in ensuring the intended benefits reach the child as intended.

"The ideal framework to sort this particular problem out is to have a good updated will, choose a guardian that has the interests of your children at heart...then you set up a Testamentary Trust that only comes into play if you die. A Testamentary Trust will be created in your will and the nominated guardians will then overlook the proceeds that get paid into the Trust at that time for the benefit of the children and that kind of water tights the thing and makes sure you have that peace of mind that they are looked after by someone who cares for them."

- Paul Roelofse, Certified Financial Planner  

For more financial tips, visit Roelofse's website www.investforlife.co.za

Scroll up to listen to the full interview.