Think you\u2019ll retire at 65? Think again. Most South Africans will have to work an extra 15 years to achieve financial security. So, start earlier, save more, invest aggressively, and maximise tax benefits. Companies have a role to play, too.<\/p>\n
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\nEvery month, you diligently stash money away in your pension fund, thinking everything will be hunky-dory when you finally put your feet up to retire. Think again. It\u2019s not nearly enough \u2013 if you\u2019re not planning wisely now, you\u2019ll be doomed to work until you\u2019re 80.<\/p>\n
No-one wants to picture themselves as old. But, for a moment, imagine yourself as an elderly citizen and still<\/em>\u00a0working. Hell no! Not only that, but many of us may very well surpass 100 because of medical advancements, which, unless accompanied by an overhaul including new bones and a few key organs, seems terrifying.<\/p>\n So, rather, consider saving prudently as freedom from enslavement. Thankfully, there are ways to avoid keeping your nose to the grindstone for the best of your golden years.<\/p>\n A study by Sanlam Corporate, covering more than 300,000 Sanlam Umbrella Fund members, found that most South Africans retiring at 65 will only achieve a 25% replacement ratio \u2013 that\u2019s the portion of their final salary they\u2019ll receive as retirement income. That\u2019s a far cry from the industry benchmark of 75% needed for a comfortable retirement.<\/p>\n \u201cMost people will need to work an additional 15 years to achieve financial security in retirement,\u201d says Sanlam Corporate CEO Kanyisa Mkhize.\u00a0Sanlam\u2019s data assumes a 9.25% return, 5.25% inflation, a 35-year savings period, and a starting age of 30.<\/p>\n He advises individuals to consider strategies to ensure their employability \u201cwell into their 70s\u201d while managing their health and constantly improving their skills to \u201cremain competitive in the job market\u201d.<\/p>\n Elke Brink, a wealth adviser for PSG Wealth, tells Currency that investors make several mistakes when saving for retirement, the biggest being setting aside too little to secure an ideal retirement.<\/p>\n \u201cEven if you have a\u00a0really<\/em>\u00a0well-constructed portfolio that\u2019s earning a proper return with a good fee structure, but you\u2019re just simply saving too little, you\u2019re not going to reach the goals you\u2019re after,\u201d she says. \u201cPeople are saving 10% or 15% of their income when it should be closer to around 30%.\u201d<\/p>\n Brink emphasises that investors should be increasing their contributions as their income grows. This includes factoring in regular bonuses, as these form part of total income.<\/p>\n Another one of the key reasons many investors fall short is that they fail to account for their true inflation rate, which rises much faster than the average basket of goods used by Stats SA to calculate official price gains. They must also consider what lifestyle they want and remember that medical aid prices climb faster than the consumer price index.<\/p>\n For instance, an index built by portfolio manager Johann Bierman called the \u201cbraaibroodjie index\u201d, shows that prices have increased by 9.8% a year over the past five years, compared with the official rate of 4.9% per year. Over the same period, the JSE all share index delivered 7.9% per year. The braaibroodjie index tracks the price of salt, pepper, tomatoes, chutney, margarine, white bread, cheddar cheese and onions.<\/p>\n To preserve capital while drawing an income, returns must outpace inflation. This requires a well-diversified portfolio that manages risk and maintains consistent returns. Typically, income is drawn from cash rather than equities to better navigate market fluctuations and tax implications.<\/p>\n Many investors tend to invest too conservatively because they don\u2019t always understand the concept of risk versus volatility, and, as a result, aren\u2019t getting the returns they need, Brink explains. While investors want to protect their capital by seeking the safety of cash or low-yielding bonds, these often don\u2019t keep pace with inflation, which means the value of their savings is being eroded.<\/p>\n Shares are growth assets and have a vital role to play in a portfolio, especially due to their compounding effect over time, even if they have their ups and downs, she adds.<\/p>\n Another important factor is choosing the right investment platform \u2013 one with low administration and commission fees to avoid unnecessary costs eating into returns.<\/p>\n Tax efficiency is\u00a0crucial<\/em>\u00a0and should consist of more than one type of product, the PSG adviser says. If all your retirement savings go into a living annuity, then pay-as-you-earn scales will kick in and hurt you, Brink explains.<\/p>\n With smart planning, the outcome can be very different. For example, investors can put away as much as 27.5% (up to R350,000) of their annual salary in a retirement annuity a year without being taxed on their contributions.<\/p>\n \u201cYou need to be planning for actual inflation and emergencies,\u201d Brink says. \u201cLike what to do if you suddenly need R100,000 to repair a car. Do you have that provision?\u201d<\/p>\n For Sanlam Corporate\u2019s Mkhize, the impact of poor retirement savings goes beyond individuals \u2013 it also puts pressure on businesses and the economy. What\u2019s more, the government faces a \u201cchallenging paradox\u201d: should it support retirees who have some savings, even though those funds are often not enough for a comfortable retirement?<\/p>\n Employers also have a challenge. They need to manage an ageing workforce while ensuring younger employees get opportunities, all while meeting transformation goals \u2013 especially in a country where youth unemployment sits at 45.5%.<\/p>\n To address this, companies can:<\/p>\n \u201cWe have a responsibility to help South Africans retire with dignity, not decades past their prime,\u201d says Mkhize. \u201cThis is not just about individual savings behaviour. It\u2019s about creating a sustainable system that works for all South Africans across generations.\u201d<\/p>\n Think you\u2019ll retire at 65? Think again. Most South Africans will have to work an extra 15 years to achieve financial security. So, start earlier,…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1914","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1914","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1914"}],"version-history":[{"count":2,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1914\/revisions"}],"predecessor-version":[{"id":1917,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1914\/revisions\/1917"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1914"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1914"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1914"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Factor in your bonuses<\/h3>\n
Invest in growth assets<\/h3>\n
Corporates also have a responsibility<\/h3>\n
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Credit: Vernon Wessels<\/h6>\n","protected":false},"excerpt":{"rendered":"