Simple steps to avert your own retirement crisis

10X Investments’ second annual South African Retirement Reality Report (RRR19) echoes international concerns about a looming global retirement crisis, says Chris Eddy, Head of Investments at the disruptive asset manager, but “there is much that each of us can do – some of it not onerous at all – to avert a personal crisis”.

Get up to 60% more savings with 10X

Investing is simple and easy with 10X's award winning low cost investment solution

Find out more

The World Economic Forum warned in June of this year that retirees across six major world economies would outlive their savings within a decade, with increased average lifespans compounding low savings rates.

10X’s RRR19, which was released this week, confirmed the findings of the inaugural Retirement Reality Report (RRR18), that South Africa is sitting on its own retirement timebomb. The report used data from Brands Atlas’s annual survey, which sampled the universe of 15.1 million economically active South Africans, as determined by Stats SA (namely those with a monthly income in excess of R7,600).

This year, 67% of respondents in the Brand Atlas survey indicated they had no retirement plan, or just a vague idea of one, 8% more than the number reported in 2018.   

The RRR19 adds that “even among those who are saving for retirement, an alarming number have no idea whether their savings plan is on track, or what proportion of their savings they are paying away in fees”.

Of the respondents who said they had some sort of retirement plan, 72% felt concerned or were unsure that they would have enough to live on after they retired. A total of 76% accepted that they would need to keep earning some income after they retired. 

Eddy said he hoped the RRR19 would give South Africans a “much-needed wake-up call” and prompt more people to start taking some basic steps to set themselves up for a decent retirement. He said the formula for retirement savings success was really quite simple: start saving early, preferably at the beginning of your working life, save 15% of your gross earnings, and invest those savings in a well-diversified high equity fund and, crucially, keep fees low.

“The starting point is to accept that retirement saving is not a discretionary expense or a luxury item,” says Eddy. “It is a necessary long-term investment for every working South African.”

He added that the RRR19 showed that many South Africans prioritised their current lifestyle, at great expense to their future selves. 

“It’s a terrible trade-off,” he said, “because while current lifestyle improvements made by not saving, or saving too little, are marginal, the resultant drop-off in retirement will be dramatic.”

Eddy acknowledges that RRR19 talks to the financial stress that most South Africans are under, and the fact that it is not always practical to save 15% of your gross income. Almost half the respondents (46,2%) in RRR19 admitted they were not saving for retirement at all, with the overwhelming majority of them (91%) blaming insufficient means or other priorities.  

This should surprise no one. South Africa’s financial stress is palpable, with our rising national debt levels, the burden of insolvent state-owned enterprises, the regular shortfall in tax revenues reported by Sars, and the many companies now reporting poor results. It is understandable that many people are struggling with their personal finances and that the country’s household savings rate is effectively zero.   

“If saving 15% of your salary every month for 40 years is impractical for some,” adds Eddy: “What is practical is to take steps such as educating yourself, engaging with your options and, crucially, keeping fees down.”

He adds that paying low fees is the easiest way to increase savings without impacting take-home pay or living standards. “It is the path of least resistance for every saver to ensure a better outcome for their future self.”

“Don’t believe anyone who tells you that retirement saving is a mysterious and complex topic,” says Eddy. “The principles are simple and there are many online tools to help you along the way.”

The RRR19 includes links to a collection of free, downloadable e-books that cover topics from the basics of saving for retirement to making your savings last in retirement.

More info and the full report:

Get investment and saving tips straight to your inbox.

Related articles

Epic miss – Part 1: What annuity income will your savings buy?

It’s probably not as big as you think it is, this income you will receive in retirement. A visitor t...

Don’t retire hurt

Cricket may be a ‘gentleman’s game’ but there is nothing gentle about the way the game is played. No...

How does your retirement annuity compare to the industry?

A retirement annuity (or RA) is a pension fund for individuals. In principle, it is a voluntary...

Get started or switch to 10X today.