It will come as no surprise to most South Africans that 10X Investments’ latest Retirement Reality Report (RRR19) identified stark differences in people’s financial situation across the various demographics in the country. The data confirms anecdotal evidence that a significantly higher proportion of South Africa’s economically active black population continue to find themselves in a difficult financial predicament, with little chance of accumulating any savings, compared with other race groups.
The added financial pressure of supporting older family members, such as parents and siblings, as well as one’s own children is a characteristic of today’s ‘sandwich generation’. The RRR19 shows that 79% of respondents in the Brand Atlas survey feel unsure about their financial situation or consider themselves to be doing badly financially, while 68% claim to have the additional financial burden of supporting family and friends.
Mabetha Cedrick Pila, Business Development Manager at 10X Investments, says a lack of financial education is costing many dearly, particularly as they struggle under the load of 'black tax'.
He says: “The issue of ‘black tax’ can make it extremely difficult to save, compared with those who don’t have to shoulder the financial responsibility of taking care of extended family members, such as parents and siblings, even grandparents and grandchildren. Unfortunately, there isn’t a special retirement savings avenue for people who are more financially burdened than others.”
The general rule of thumb is that working people should save 10-15% of their earnings towards retirement, but the RRR19 found that most South Africans were too financially constrained by their own and others’ living expenses to save much, if anything, for their own retirement.
Pila adds: “With many people struggling to pay their own bills, ‘black tax’ diminishes any chance they have of making regular contributions towards retirement. Unfortunately, South Africans are constantly forced to prioritise immediate expenses over long-term investments.”
He points out that this leads to an almost inescapable cycle of dependency. He adds that, without financial education, economically active South Africans will continue to find themselves in a financial dead-end, with little prospect of breaking this cycle.
He advises: “In order to realise a dignified, secure retirement you have to find a way of saving money for the long term. If you reach the end of your working career with no savings to speak of, you will ultimately become the dependent. It’s a cycle that gets perpetuated.”
Pila adds a stark warning: “There is no guarantee that a support structure, such as the one you’ve been providing to others, will exist for you when you retire. While 'black tax' is a necessary reality for so many people today, from a financial viewpoint, it’s not sustainable and a barrier to prosperity for all concerned.”
In today’s straitened times, Pila’s warning will resonate widely. The RRR19 found that 72% of South Africans across all demographics were either doing badly financially or unsure of their predicament, 58% were struggling to afford their monthly living expenses, and 64% were supporting a variety dependents, many of them adults.
Regardless of class or race, an enduring culture of dependency and a lack of long-term planning is likely to result in increasing levels of poverty.
“As tough as it is,” says Pila, “it’s important to secure your future first by educating yourself and prioritising saving, and only then see how you can help your dependents secure theirs. You have to make sure that you have a plan for yourself to avoid becoming dependent on others in later life.”
He adds that breaking the cycle of dependency would likely involve some difficult conversations with family members, where everyone concerned would need to adjust and learn how to live within their means.
“Taking control of the situation for yourself means habitually investing whatever little you can in a retirement vehicle with above-inflation returns and low fees. Your future self and your family will thank you for it,” concludes Pila.
10X Investments is running a campaign to encourage South Africans to educate themselves about retirement saving. Everyone who engages with the campaign to discover what R1 million would be worth when they retire is entered into a draw and stands the chance of winning a R1 million 10X Retirement Annuity. https://www.10x.co.za/winthe10xmillion