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South Africans, it seems, have a particular affinity for putting stuff off - at least, if you believe that our language reflects our culture. Take for instance, the creative interpretations of ‘now’ that have become a hallmark feature of the South African English lexicon: Now, now-now. just now. None of which actually mean this instant but rather, varying shades of later.
As amusing as this linguistic quirk might be to foreigners, the consequences of procrastination are no laughing matter here at home, particularly when it comes to saving for retirement. Only 6% of South Africans are able to retire comfortably, a statistic that in part can be explained by our tendency to delay saving for retirement until well into our middle ages; as well as our apathy when it comes to ditching the providers who we know (or strongly suspect) are giving us the short end of the stick.
So, why then do we do it? And most importantly, what can we do about it? According to Psychology Today, there are 5 main causes:
Absence of structure.
When we don’t have some kind of a formal structure to work around, we are more prone to getting side-tracked. For instance, a lack of imposed direction in the workplace can make impulsive behaviours (such as checking Facebook or making your 20th cup of tea) easier to satisfy. Likewise, most people lack a formalised retirement plan, and sign up to whatever their employer is offering without a second thought as to whether they are saving the right amount with the best provider. This “autopilot” mode lulls us into a false sense of security, allowing us to squander our financial resources on short-term needs and wants.
The Solve: Plan!
Developing a basic retirement plan adds structure to your saving. A good plan will help you set a goal (ie how much you need to save in order to maintain your desired lifestyle post-retirement) and tell you what you need to do to achieve it (ie how much you should be saving each month). Traditionally, this planning has been done via financial planners or advisors, but it’s now easier than ever thanks to the range of online planning tools that do the job the same - if not better. A great example is the 10X Retirement Plan Calculator.
No rocket science here - avoid the tasks that they find boring, unpleasant, or overwhelming. And retirement planning doesn’t exactly top the list of Fun Ways to Spend Your Free Time.
The Solve: Start small
While there’s little you can do to make saving for your retirement more exciting, you can make it a whole lot more engaging by breaking it down into smaller pieces. For example, if the thought of sitting down and developing a financial plan feels daunting, why not seek out information about the retirement industry to get you thinking? Even if the content doesn’t thrill you at the outset, chances are you will learn something that will motivate you to take action. For example, learning about the investment myths that the retirement industry uses to fool you, or the common retirement mistakes that people make, such as not questioning the high fees that their providers dump them with.
As Psychology Today reports, “Another important factor is the timing of the reward and punishment—meaning that the point of choice and the associated consequences are separated in time. A gap like this produces internal conflict between future and present interests.” For example, “a smoker who wants to quit can spend many years having ‘one last cigarette’” because the health rewards of quitting are only experienced far down the line. Similarly, the ill-effects of smoking are also distant realities, meaning that there is not only no instant reward, but no immediate deterrent. This conundrum can be clearly seen in the retirement space, where the consequences of good and bad decisions alike are only felt decades after they are made.
The solution: Think short-term
If the thought of your retirement is so far away as to be abstract, try thinking of it in real terms in the here and now. A great way to do this is with a fee analysis that shows you what the real impact of the fees you are paying now will be. Another option is a fee comparison that shows you what different providers can expect to deliver over the long term.
10X offers both these services free of charge. Simply email comparison@10X.co.za with your name and contact number, and one of our retirement experts will get in touch.
While procrastinating is bad for us in the long term, it can deliver short-term psychological benefits by alleviating anxiety. What’s important to remember however, is that this coping strategy is one that can backfire, as the longer an important task is delayed, the more pressure we face, and the greater our stress and anxiety become. For example, putting off studying for exams. Slacking off might feel good a month before your exams start, when you still have time to catch up on your learning schedule. But as the deadline draws near, the stress of having to cope with a large amount of study material in a short space of time can prove overwhelming. This pattern can be particularly true for those nearing their retirement, who are yet to review their finances or address their underlying anxieties around lifestyle adjustment.
The solution: Prepare in advance
If facing retirement is leaving your stomach in knots and inhibiting you from taking action, the best way to alleviate your stress is by confronting your concerns well in advance. For example, thinking about how to get the most from your retirement savings, and how best to mentally prepare for the next phase in your life.
When the going gets tough, people with low self-confidence are more prone to doubts about their capacity to see a task through successfully. This behaviour can be seen clearly in the retirement space, where the industry bombards people with confusing choices, complicated language, and conflicting messages. Add to this a reality where most people -even those that are otherwise educated- are ignorant about the fundamentals of investing wisely, and you get a situation where people lack confidence in both themselves and their providers. The result? They end up making bad decisions such as switching funds impulsively or choosing providers and products that perform poorly.
The solution: Keep it simple
The industry may be complex, but investing wisely shouldn’t have to be. Steer clear of providers with tons of indistinguishable products. Avoid brokers whose “advice” stems from sales incentives. And run like hell from advisors who claim to know which funds are going to perform well. Instead, seek out providers who can answer your questions, and be wary of those who dismiss your concerns. And most importantly, educate yourself. The more informed and critical your approach, the more confidence you will gain in your ability to make good decisions and defend your best interests. Whether you are 25 or 65, it is never too late or early to start. The best time is always now. Not just now, not now now, but right now.