Are attitudes towards work and retirement changing, or are people being forced to rethink retirement as they realise they won’t have saved enough to retire on?
These questions were raised by a recent retirement survey by Sanlam, which found that 60% of South Africans save for their wind-down years, but only 37% are saving consistently.
In the survey, “Money Matters: South Africans' views and approaches towards retirement”, 34% of the 1 200 respondents said they see retirement as the time to start a second career. However, 24% believed they wouldn’t be able to afford to stop working at all.
Farzana Botha, segment manager at Sanlam Risk and Savings, says the responses painted a diverse picture of people’s perception of the wind-down years.
She explained: “The staid view of retirement needs to shift to a ‘choose-your-own-adventure’, hyper-personalised path, where people actively define the life they want to live. There’s evidence of this kind of self-efficacy already emerging.”
Ranking of priorities
In the current South African context, retirement planning ranked as a low priority.
“Young people especially are committed to empowering themselves through educational and entrepreneurial pursuits. Self-education such as a new certification, degree or diploma ranked as the top priority at 37%, especially for 25-34-year-olds. While black respondents comprised 54% of the total sample, they made up 68% of the participants that put education as their number-one goal,” she said.
Entrepreneurship ranked second. It was particularly prioritised by people who were younger, less affluent, black and male.
Botha believes that these priorities point to people’s emphasis on self-efficacy. Young people seem committed to upskilling themselves to ensure greater socio-economic access and opportunity. This is hugely positive in a nation where about five million young people are unemployed.
“Being on track to retire comfortably took seventh place in a list of eight defined priorities. “For young people in particular, it’s just not a consideration right now, showing the vital need for retirement planning to be reframed to be more relevant.”
Keep working or wind down?
Of the sample, 51% of respondents said they fear not having enough income to afford the lifestyle they’re used to. Self-sufficiency stood out as a key goal, with just 6% of respondents saying they’d be happy to live off the state or be dependent on their families.
“Interestingly, 46% of respondents want to retire at 61-70 years old, showing the traditional take on retirement remains entrenched, despite the dramatic increase in people’s expected lifespan,” said Botha.
A quarter of the respondents planned to live off their savings and retirement funds; these respondents tended to be older and had a higher income. Just under a quarter (22%) wanted to keep working for as long as possible – these tended to be people who were younger and less affluent, and presumably less sure about their ability to build sufficient savings to retire.
“In terms of second careers, 34% of people indicated their intention to work part-time to supplement their wind-down years. Only 25% see themselves stopping work completely. Those contemplating a second career were more likely to be 25-34 years old, suggesting upcoming generations are thinking about their wind down years differently," explained Botha.
Are South Africans on track?
Many people are not on track – and they know it. Two-thirds (67%) of respondents said they’d started financially preparing for their wind-down years, but 44% believed that they were not doing enough to make their goals a reality. Worryingly, 33% had not started planning at all.
In terms of saving for retirement, 45% of respondents used savings accounts, 39% saved through an employer’s pension fund, 12% had retirement annuities (RAs) and 1% used other investment options. People with pension funds and RAs tended to be older and more affluent. People relying on a savings account tended to be younger (18-34 years), black and less affluent.
There was significant opportunity to assist more people with understanding what savings goals to set and the roadmap required to reach these, said Botha, underlining the importance of professional financial advice. “South Africans know they need to save; they just need more resources and direction on how much to save and which vehicles to use."
The wind down years need to be radically reframed in a way that makes people excited for their future. “We need a new set of retirement icons – ones that speak to a world where your wind-down years are what you want them to be. People are living fulfilled lives of purpose for longer. We need to help them plan for that. The greatest adventure awaits," she added.
PERSONAL FINANCE