Under-saving for retirement remains an issue in South Africa, and the majority of people cannot afford to retire, let alone continue to support their current lifestyle, a new study by Genesis Analytics and the Financial Sector Conduct Authority (FSCA) shows.
Genesis Analytics noted only 12% of the 3.6 million individuals in the retired age group received a form of income in 2020. More than 90% of retirees are unable to maintain their standard of living prior to retirement and two-thirds of members have less than R50,000 in their retirement funds.
How much do I need to retire?
You need to be able to maintain your life standard when you retire. In order to maintain this you’ll need around 15 times your annual salary, so 15 x R300,000, meaning a lump sum of roughly R4. 5 million. The more money you have available to invest once you retire, the better your lifestyle will be and the more likely you will be to withstand the impact of unexpected events, such as the current pandemic.
When should I start saving?
Well, the earlier you start, the better off you will be.
Assuming that you will be comfortable living off 75% of your pre-retirement salary, research indicates that saving 17% of your salary is a reasonable starting point for the 25-year old saver.
This amount increases dramatically the later you start. You need to save 22% if you start saving at 30, up to 42% if you start at 40, and up to 59% if you start at 45.
Easy retirement tips for millennials
- Time to take the first step. Whether you are 20 or 30, it’s time to start saving towards retirement. Whether you are saving 15 to 20% or whatever you can, it’s important that you start.
- Seek help: Work with a financial planner to do the math. They can map out the journey, analyse what is needed and will help you to determine the amount needed to retire in style. They will also help to select the best, interest-bearing retirement plan or pension fund on the market.
- Do your research: Some companies, particularly large corporates, do allocate portions of your total cost to company to salary towards a pension fund or retirement annuity. Find out from the HR team what this entails and stay informed by tracking its performance throughout.
- Focus on the end goal: On the days where you feel that retirement savings would be better spent on a holiday, take some time to visualise your retirement. This will help to keep you on track – think short-term sacrifices for long-term gain.
- Increase your allocation: As you receive salary increases at work, make sure to up your retirement savings accordingly. Even a little bit can go a long way.
Start saving for your retirement now:
ryno@louwnet.co.za 0645335339
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