One such deadline is to sort out one’s financial affairs in good time before retirement. “Discovering that your pension is worth far less than expected following years of saving is likely to be devastating,” says Khwezi. “Even more so if you have been saving diligently but your investment growth has been eaten up by high fees, in other words someone else is retiring well on your sweat and toil.”
By then it may be too late to ensure a comfortable retirement for yourself, and you may be forced to rely on financial support from your children. “Unfortunately, this is an all-too-common predicament for South Africans,” adds Khwezi.
10X Investments’ second annual Retirement Reality Report (RRR19), released this month, reveals the extent of the South African retirement crisis. This year, 67% of respondents in the Brand Atlas survey (1) indicated they had no retirement plan, or just a vague idea of one, 8% more than the number reported in 2018.
Almost half the respondents (46,2%) admitted they were not saving for retirement at all, with the overwhelming majority (91%) blaming insufficient means or other priorities. Khwezi asks how many other priorities are more important than making sure you can support yourself in your old age.
He said it was very alarming that so many South Africans did not have the means to save for retirement, as was the case with 55% of those who were not saving, but he said those who said it wasn’t a priority needed to think again.
“People who say they are just too busy to think about it really need a wake-up call,” says Khwezi. “You must make time during your working years to make sure you can sustain yourself in the years when you no longer have a salary.”
If you have a plan, says Khwezi, you should be checking regularly to see that it is on track. “Is your capital growth at least beating inflation? What impact do the fees you’re charged have on the performance of your fund?
The RRR19 revealed that half of those with a retirement plan didn’t know what fees they were paying; another 16% thought there was no fee. Khwezi said this was incredibly unlikely. “The fee paid might be difficult to find (and almost impossible to understand) but you can be sure there is one.”
The RRR19 pointed to high fees as a contributing factor in South Africa’s retirement crisis because “seemingly small regular charges against savings compound to leave a huge hole in people’s pensions”. The report added that in the context of a consistent 40-year savings regime, someone paying 3% in fees rather than 1% pa would receive almost 50% less money at retirement.
Khwezi adds: “Meetings are important, deadlines are important, but one of the most important deadlines of your working life is your retirement date. Unfortunately, this is one deadline you can't quickly prepare for weeks or months before the due date. Make time now to review, restructure and realign your retirement plan.”
For more information and the full Retirement Reality Report: https://www.10x.co.za/blog/south-african-retirement-reality-report2019
(1) The annual Brand Atlas survey samples the universe of economically active South Africans (15,1m in 2019), defined by StatsSA as those with a monthly income in excess of R7,600 per month.
