The latest 10X Retirement State Report paints a grim picture for South Africans when it comes to saving for retirement, with around half having no savings plan at all.
“Our findings from 2019 to 2023 show that there has been little meaningful change in the propensity or ability of South Africans to plan for their retirement over the past five years,” the report said.
“Roughly two-thirds of adults have no savings at all for this purpose or their retirement plans are vague. The remaining third are unsure of what they need to fund their retirement. I have a relatively solid grasp of that.”
The situation steadily worsened from 2018 to 2021, with the country bearing the brunt of coronavirus restrictions, destroying consumer confidence and eating into already meager household savings.
The main reason for SA's abysmal savings rates is affordability, with 70% of survey respondents saying they can't afford to save because they have nothing left at the end of the month.
This is supported by Statistics SA data which shows that a basic nutritional food basket for a family of four costs R3 430 (Household Affordability Index, March 2023). This means that even in dual-income households, parents do not earn enough to provide the nutritional needs of their families.
There is also a wide divide between young and older South Africans when it comes to retirement, with younger respondents expecting to retire earlier, while respondents aged 55 expect to retire later.
The report, based on survey data compiled by Brand Atlas, found that “Although a smaller percentage of respondents under 35 years old than respondents over 35 years of age, more respondents plan to retire before age 60. ” “This may be due to the idealism of young people and their lack of awareness of what it takes to plan and save for a comfortable retirement.”
The survey also highlights some differences in how men and women prepare for retirement, with 49% of women not making any retirement plans compared to 43% of men. About 11% of men say they diligently follow a well-thought-out retirement plan, more than twice as many as 5% of women surveyed.
The latest research, similar to previous research, shows that women are more cautious than men when it comes to saving and investing. “While a smart and prudent approach to investing is commendable, it may ultimately be to the detriment of women, as only riskier investments such as listed equities can deliver above-inflation growth over the long term. “There is,” the report states.
Workers cash in on retirement savings
Another worrying feature of the study is that workers regularly cash out their retirement savings when changing jobs. Financial knowledge regarding retirement benefits is relatively high, with 36% of respondents having a good understanding and a further 39% having some knowledge.
However, knowledge about costs is limited, with only 37% of respondents with retirement plans able to clearly answer the question of cost. Furthermore he 37% did not know what the cost of the investment was. 13% believed that fees were based on performance. Meanwhile, 13% believed no charges had been filed at all.
Perhaps one of the most alarming findings of this study is that fewer people are leaving their jobs voluntarily. In 2021, this figure was 70%. In 2023, this number has dropped to 60%.
Just over a third of retirees said they were “very” or “very confident” that their savings would last. “[This] “This calls into question the optimism of people who are confident that their retirement is on track, but who may be deeply disappointed when the reality of retirement arrives.” 10X says.
Even more serious statistics
It takes a typical earner 40 years to save 15% of his or her income from the first day of work (and maintain savings when changing jobs) and retire with 30 years of peace of mind. This assumes that his real return after inflation after costs is 5%. More than half of respondents had a good idea of how long it would take to save, but 22% thought they could save for retirement within 20 years.
It's no wonder that 71% of respondents were “partially or strongly” of the view that they will need to continue earning a living beyond their official retirement date.
“The inconvenient truth is that the majority of South Africans cannot afford to stop working,” the report says.
Approximately 60% of respondents expect to maintain their standard of living in retirement based on their retirement replacement rate (the ratio of post-retirement income to pre-retirement income). Some costs will decrease or decrease, such as mortgage repayments, transportation and clothing costs, and income taxes, while others, such as medical costs and health care, will increase.
“The difference between what South Africans expect their retirement to look like and the reality faced by retirees and those nearing retirement cannot be underestimated,” the report concludes. “Knowledge and information are the key to bridging the gap between expectations and reality. They need to be better informed about the additional disadvantages they suffer.'' The problems and cost implications that need to be overcome. ”
provided by 10x investmenta licensed financial services provider (FSP number 28250).
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