August 4, 2022
  • August 4, 2022

South Africa retirement expectations vs reality

By on October 11, 2021 0

A significant number of South Africans believe that they will continue to work for the rest of their lives, with no plans for retirement.

That’s according to the latest 10X Investments Retirement Report, which is based on the results of the 2021 Brand Atlas survey. Brand Atlas tracks and measures the lifestyles of 15 million economically active South Africans – living in households with a monthly income of over R 8,000 – through online surveys.

Of those survey respondents who had retired, 70% said they retired when they wanted to, while 29% were forced to retire in advance. Only 2% said they had to work longer than expected.

“Due to a relatively small percentage of survey respondents who have retired (around 3%), the numbers tend to vary from year to year,” 10X Investments said.

“However, the trend over the years suggests that about a third of retirees are forced to retire earlier than expected, a double whammy for any retirement plan, as more years of retirement need to be funded by less. years of contributions and compound returns. For those who have a formal job and are not planning to retire, some may find that their employer has other plans.

Data that focuses on when South Africans plan to retire paints an even bleaker picture, with young South Africans having only a vague idea of ​​when they plan to retire, while older South Africans report that they plan to work beyond age 70 or not to retire at all. .

“It is striking that while 35% of people under 35 think it is possible to retire before the age of 60, only 4% of people over 50 consider it. as realistic, ”said 10X Investments.

“In the same vein, while among the younger cohort (between 25 and 49 years old), on average, only 46% plan to work beyond 64 years, among those 50 years and over, much more (71 %) have looked to the reality of their retirement and expect to retire beyond age 64, or not at all. Both sets of expectations seem unrealistic in a country like ours.

Almost half of those surveyed believe they can save for their retirement in less than 30 years. The fact that most people think they can quit it late (that is, until the last 20 or 30 years of work) is a fundamental problem, 10X said.

What’s the difference between saving for 30 or 40 years? As part of a coherent savings plan, with a real net return of 5% (after fees and inflation), saving for 40 years rather than 30 years will provide 83% more retirement income. Or to put it another way, people who save for just 30 years instead of 40, will have to settle for almost 50% less retirement income, according to the financial services group.

Most survey respondents (74%, compared to 77% last year) believe they will need to generate some income after retirement. Another 19% are not very sure, leaving just 7% of respondents confident that they are on the right track to what is increasingly becoming an obsolete notion of retirement, based on full financial independence.

Nothing to store

Increasingly, data shows that for the majority, the problem is not one of pride or ignorance, but one of economic hardship: 64% of those polled said they just couldn’t get by. allow you to save because there was nothing left at the end of the month.

According to Stats SA’s Quarterly Labor Force Survey for the second quarter of 2021, South Africa’s unemployment rate was 34.4%. Young people (15-24 and 25-34) recorded the highest unemployment rates of 64.4% and 42.9%, respectively.

In a new economic update on South Africa released in July 2021, the World Bank found that the coronavirus pandemic had “revealed structural weaknesses in the labor market among young people, especially facing high rates of unemployment. acute unemployment, with an incidence twice as high as among the older groups. .

The World Bank report found that among 15-24 year olds 63% are unemployed and looking for work, while among 25-34 year olds the rate is 41%. When discouraged workers are included, unemployment rates reach 74% for 15-24 year olds and 51% for 25-34 year olds.

“This means thousands of people are entering the workforce as more retirees try to keep their jobs because they simply cannot afford to retire. “said 10X Investments.

“This personal misery for many, of course, fuels the latent social conflict. The number of people indicating that saving for retirement was just ‘not a priority at this stage in their life’ is still high but declining: 22% of respondents – up from 29% last year and 36% l last year – chose this dismissive response instead.

This could mean that they have lost the “luxury” of choosing to allocate their discretionary spending because they no longer have those discretionary spending, 10X Investments said. It could also mean a change in attitude towards retirement savings, based on their own recent experience.

“Either way, it’s a tough reality check. Hopefully when the economy picks up and people find themselves forced to choose again, they will remember what it was like to have no money and limited choice and take action to prevent that. this will not happen again in the future. “

Read: South Africans struggle to pay their bills – here’s how much we owe on our credit cards.