Simple steps to avoid being engulfed by SA’s retirement crisis

The third annual South African Retirement Reality Report (RRR20) confirms that the global pandemic and response to it has magnified the country’s retirement planning crisis, but workers are reminded that avoiding a personal retirement crisis is in their own hands.

The RRR20, compiled by 10X Investments and released on October 24, confirms the findings of the two previous reports: that South Africa is sitting on its own retirement timebomb.

RRR20, which is based on the findings of the 2020 Brand Atlas Survey that measures the lifestyles of the universe of 15.1 million economically active South Africans, found that the problem of the majority of South Africans not being able to retire with dignity shows no signs of abating.

This year, 49% of people surveyed said they didn’t have a retirement savings plan at all, up from 46% last year. The 2020 report finds that a mere 6% of South Africans surveyed were executing a retirement plan that they had properly thought through, the same as last year and aligned closely to with National Treasury’s estimate that only 6% of South Africans were on track for a decent retirement.

Khwezi Jackson, Junior Investment Consultant at 10X Investments, said the RRR20 showed that most South Africans continued to prioritise their current lifestyle at great expense to their future selves. 

“This is the worst kind of trade-off,” he said, “because the small lifestyle benefit you get from not saving today will mean a big lifestyle downgrade in old age.”

He added that he hoped the report would give his fellow South Africans a wake-up call and motivate people to start taking some basic steps to set themselves up for a decent retirement. 

Jackson said the formula for retirement savings success was really quite simple: start saving early, preferably at the beginning of your working life, ideally 15% or more of your gross earnings, and invest those savings in a well-diversified high equity fund and, crucially, keep fees low.

He acknowledged that many people were not able to save at the recommended rate – especially given the additional economic hardship thanks to Covid-19 and the resulting lockdown – but said there was little excuse for ignoring the issue. “You are fooling no one pretending to believe that retirement saving can be dealt with”

He added: “Saving 15% of your salary might not be manageable, but educating yourself, engaging with your options and making the most of what you have is not that hard.” 

The starting point, says Jackson, is to accept that retirement saving is not a luxury item. “It is your responsibility, and a necessary long-term investment for every working South African.”

The RRR20 found that even among those who say they do have a retirement savings plan, only 30% said they felt good or pretty good about their plan (down from 33% in 2019). 

Jackson added: “It is unforgiveable that [as found by RRR20] so many of those who can afford to save have no idea whether their savings plan is on track, or what proportion of their savings they are paying away in fees.”

He added that paying low fees was the easiest way to increase savings without impacting take-home pay or living standards.

“Don’t believe anyone who tells you that retirement saving is too complex for you,” says Jackson. “The principles are simple, and there are many tools online to help you do any necessary calculations.”

Start with a plan, he says. Use a retirement savings calculator, like the one on 10X’s site, to work out how much you will need to be able to maintain your lifestyle in retirement, as well as how much you need to be saving today to get there. Then make the adjustments required to get yourself on track. (The calculator allows you to adjust the inputs to see what you need to do, whether that is save more each month or perhaps move your retirement date out).

If you are not sure what fees you are paying on your current fund 10X has a free service to analyse your current policy. 

If you need more information about the basics 10X has published 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 Retirement Reality Report 2020

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