High Unemployment and debt, coupled with rising electricity, food and fuel costs, are having a devastating impact on South Africans’ budgets, leaving them with little or nothing to put away for retirement.
This is according to Mica Townsend, the business development manager at 10X Investments, who was commenting on the company’s 2019 Retirement Reality Report, which was released last month.
The report paints a bleak picture of South Africa’s retirement-saving landscape. It shows that 67percent of economically active South Africans either have no retirement savings plan or have only a vague idea of one.
It also found that 55 percent of South Africans are faring so poorly that they have no money left at the end of the month to put towards any form of retirement plan.
Townsend says that, according to the report, those who are saving for retirement aren’t really following a plan; they are just hoping for the best.
“What we also found, even more worryingly, is that from 2018 to 2019 all of those metrics got worse. So, the amount of people with a plan reduced, and the amount of people who felt they were on track for retirement, or had any idea how they were going to sustain themselves in retirement, had got worse.
“It has been a tough year financially, and a lot of people save what’s left after everything else has come out - the fuel, groceries, electricity. One of the questions we asked was: ‘If you don’t have a plan, or if you are not saving for retirement, why not?’”
Townsend says respondents said either that they have nothing left to save or that saving for retirement was not a priority right now.
Townsend advises consumers who don’t have a retirement plan in place to start saving towards one, no matter how little they can afford.
“You need to start, even if it is R100 - you can work out how to increase that each month - but you need to start somewhere.”
She says consumers should prioritise their spending by limiting or cutting on luxury items.
“In the same way you were to pay for your electricity or buy your petrol, you need to say, ‘whatever happens, this amount is going towards my retirement’, and then you do the luxuries and the nice things with what’s left over.
“By not doing something about it now it is just affecting your future. You are still going to suffer; you are just delaying that, and by retirement you have only few other options,” says Townsend.
She says consumers who have unsecured debt or a significant amount of debt should pay it off as soon as possible. Debt should not be carried over into retirement.
Townsend says that once you have paid off your debt, you should avoid taking on new debt, but use the “extra money” to save towards retirement.
“Discovering that your pension is worth far less than expected following years of saving is likely to be devastating - even more so if you have been saving diligently, but your investment growth has been eaten up by high fees. In other words, someone else is retiring well on your sweat and toil. By then it may be too late to ensure a comfortable retirement for yourself, and you may be forced to rely on financial support from your children. Unfortunately, this is an all too common predicament for South Africans,” says Khwezi Jackson, an investment consultant at 10X Investments.
Hilan Berger, the head of institutional business development at 10X Investments, says the report shows that saving for retirement is a low priority for South Africans and that the bigger picture looks bleak.
“South Africans need a wake-up call. Retirement saving is not discretionary spending, but a necessary long-term investment for every working South African,” says Berger.