01 Jul What to do? Longer life, less savings.
The United Nations declared 2021 – 2030 the UN Decade of Healthy Ageing, calling for action to foster longer and healthier lives. People are living longer. The question is, how do they stretch and preserve their retirement funds?
Turning to South Africa, a recent article in BusinessTech reported on a ‘retirement crisis’ with only 6% of South Africans positioned to retire comfortably. Reference to ‘comfortably’ relates to the ability to replace about 75% of a final salary with savings and investments.
Given the high cost of living which shows little sign of abating, how can one manage retirement?
Start young.
For many, it may be too late but let’s educate the younger generation to start saving early. Apart from making an early start, lets encourage them to make the right savings and investment decisions.
Unretirement.
We’re living longer, we’re healthier but about 90% can’t retire. Maybe we should consider shifting our retirement age to the ‘70s or even ’80’s or make that retirement target date situational rather than prescribed. The big advantage of working longer is creating the ability to generate additional income and buying more years to save towards retirement.
With decades of experience behind you, you can consult (you have the knowledge, skills and experience) or start a low-risk business. Earning just R 10 000 pm from an enterprise essentially increases your retirement ‘capital’ by about R 1,5 million rand (based on monthly payments from a retirement fund of that size). You can then either invest the R 10 000 pm earned from your business or draw less from your pension fund. If you plan smartly, your business can attract a value, and you can sell it at some stage.
Working longer can also help you to retain higher energy levels and mental alertness.
Financial advice.
A frank and open discussion with a credible financial planner will provide you with the perspective needed to plan. You may be coping now on your retirement savings but with inflation, what will the picture look like in 5 years’ time? The picture presented may not be comfortable, but early answers will buy you time to plan.
A good financial planner will advise you on both sides of your balance sheet by advising on your expenses as well. For example, medical aid is important for a retiree. We’re living longer but that doesn’t mean we don’t get ill. But do you still need that premium medical aid package or something less costly?
Bottomline, don’t make knee jerk decisions and make drastic changes (such as cancelling a medical aid) until you’ve consulted with an expert.
Eradicate debt.
Paying 20% plus on debt but only earning 8% on your savings makes no sense and only aggravates the situation. If you do not have the means to remove debt, consider talking to a debt review or counselling company which is NCR (National Credit Act) registered which helps pensioners.
It is true that we are living longer and equally true that South Africans are struggling to retire comfortably or at all. If you’re in this position, do not lose hope.
Salt Employee Benefits is South Africa’s largest independent retirement fund administrator with over 900 000 members.