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HOW TO MAKE YOUR MONEY LAST AS LONG AS YOU DO

Updated: Feb 26

Let's turn back the clock to 1960, the earliest year the United Nations began keeping global data records. Back then, the average life expectancy was 52.5 years old. The United Kingdom has older records dating back to 1841. The average life expectancy was less; a baby girl was expected to live to just 42 years of age, and a boy to 40. In 2016, a baby girl could expect to reach 83, and a boy, 79.

Today, the global average is 72. Let's turn the spotlight onto South Africa's statistics. The life expectancy for South Africa in 2020 was 64.12 years, which is a 0.39% increase from 2019. The life expectancy for South Africa in 2019 was 63.87 years, a 0.4% increase from 2018. These numbers tell us that the average life expectancy is increasing, which could be a result of continually evolving modern medicine and technologies.

The number of people living to their nineties and even early hundreds is increasing, adding more years to our lives than we may have planned. This means the notion of retirement at 65 is becoming outdated. We need to be planning ahead, far ahead! We may live longer than expected, and the stats indicate that most people who live longer than the average do not live as comfortably as they should and struggle through their last years.

In a new book, author Wynand Gouws tackles how to provide for yourself if you live to a ripe old age - as is increasingly likely. We explore some of his advice and the factors which affect retirement planning in South Africa.


life expectancy graph

RETIREMENT IN SOUTH AFRICA

South African law does not stipulate a particular age for retirement, and different sections of the regulation provide for different retirement ages.

Regarding the traditional definition of retirement, people retire on average between the ages of 55 and 65. This means the average person has approximately 35 years to prepare for retirement and then assumed to spend 15 to 20 years in retirement. However, because this assumption has become obsolete, we need to rethink this traditional idea and start planning further.

Unfortunately, many South Africans don't spend enough time thinking about what retirement means to them and how they aim to plan for those years financially.


Retirement money jar

FACTORS AFFECTING RETIREMENT PLANNING

Several factors affect retirement planning. Below are some of the key findings from surveys conducted by Old Mutual, Sanlam, Just South Africa, and 10X Investments:


SOUTH AFRICANS DON'T SAVE ENOUGH.

Do you put money away every month towards a savings pocket? Several studies on retirement planning indicate that only 6% to 10% of South Africans can retire in a financially stable position. Less than one in ten people will be financially secure when they retire. That leaves 90% of retirees who will need to reduce their expenses significantly and sell some of their assets in order to fund their retirement. That is a huge number! This means retirement planning and savings are falling by the wayside in this country. Can you imagine having to depend on your children one day to survive or living in a forgotten retirement home?

Irrespective of your personal circumstances or wealth, you should always consider proper financial planning. With this said, why not enlist the assistance of a qualified financial planner from Wallstreet Financial Services. They will help you plan for your dream instead of outliving your money.

Remember: Retirement success = early start + sufficient savings + healthy returns


WE DON'T START SAVING SOON ENOUGH.

Retirement planning needs to start early because it is a long-term commitment. Ideally, you should start saving towards your retirement from the moment you receive your first salary. In fact, did you know that parents/ guardians can already start a retirement annuity for their children's’ retirement years?

Retirement planning becomes more refined as you move closer to your retirement age. However, two basic financial principles remain:

1) Save consistently

2) Be mindful of debt and only use credit constructively.

According to Wynand Gouws; as you approach retirement age and start refining your retirement strategy, the three critical variables that determine your income post-retirement are:

• Accumulated retirement and other investments

• The income required at retirement: at least one in two people do not do this basic calculation of determining what income they will need and have no idea of their income requirements at retirement.

• You and your spouse's or partner's life expectancy.


According to the Just Retirement Insights Survey of 2019:

  • 53% of South Africans have not calculated how much they would need per year in retirement

  • 54% have a retirement budget at age 60 and over.

  • Only 40% of under-60s have a retirement budget in place.

  • A frightening 15% of respondents stated that they intended to rely on family in retirement – and this was why they did not need a retirement budget.

Man and women cutout on money


THE GROWTH OF THE SANDWICH GENERATION

There have been some fundamental shifts in family dynamics through recent generations. More children stay at home longer and often become the financial backbone for their parents' retirement. People in this position, who are mostly in their forties or fifties, are known as the "sandwich generation."

One in two 18- to 34-year-olds today are still living with their parents. This may be due to current socioeconomic conditions. Gainful employment is difficult to come by, and the average cost of living is making affordability for basic needs a challenge for many South Africans.

The additional expenses related to caring for your grown-up children and your own parents can seriously devastate your retirement plans. This will lead to severe income shortfalls during your own retirement. It is crucial to discuss other viable alternatives with any grown-up children who are still staying at home with you. If you are carrying the bulk of the financial responsibility of looking after your parents at home, then you need to ensure that your siblings contribute towards your expenses. Budgeting is vital for a generational household; everyone should be sharing the load of expenses.

LIFETIME WORK NO LONGER EXISTS

Lifetime work is rare; in fact, it barely exists. People do not stay within the same employment for a lifetime anymore. More people are moving between employers, changing careers, or even emigrating in search of better and more lucrative career opportunities in other countries.

Career progression should be a goal for everyone, but ensure every career move you make doesn't destroy your accumulated savings and financial position. Moving from one employer to another often provides the opportunity and temptation to access accumulated pension fund savings unnecessarily. Cashing in your pension prematurely could be detrimental to your retirement years, so avoid tapping into these funds and transfer the fund instead of using it.

Research by Alexander Forbes indicates that only 9% of members preserve their pension savings when leaving an employer. This is a shocking statistic and explains the dire position of many retirees.



man in blue suit

RETIREMENT PLANNING WITH WALLSTREET FINANCIAL SERVICES

Do not leave your financial retirement plans too late. Even if you have just started working at eighteen, start putting money away now for a comfortable retirement later on; retirement planning is highly beneficial. Information is power; it is important to educate yourself and secure a retirement plan that will last throughout your golden years. Contact Wallstreet Financial Services to discuss your retirement options professionally.

When we look at your retirement goals, we dissect every part of your investment portfolio to provide an accurate overview of where you are and where you want to be.

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