Playing retirement saving catch up? You're not alone

By Staff Writer

It's the biggest, most under-reported adult activity in South Africa; so don't think you're alone if you're playing retirement catch-up. Chances are your neighbours are quietly - perhaps desperately - doing the same.

The good news is that the chances of success could be better than you think.

The positive perspective comes from Absa Investments, an asset manager with a strong base of pension fund clients and a firm often consulted by retail investor-savers looking to beat inflation in preparation for the 'golden years'.

"Most salary-earners over 45 are either playing retirement catch-up or thinking about it," says Johan Gouws, an Absa Investments executive director. "The challenge is so common that well-proven strategies have been developed to help you do it."

One problem is that many financial projections assume an ideal scenario in which a perfect saver invests steadily from the age of 25 for a comfortable retirement.

"In reality people marry, take on debt, buy a house, have kids and spend huge sums on their education," says Gouws. "You might be 55 before your bond is paid and the kids are off your hands.

"Only then do have the money for proper retirement provision. You see the tables and projections, all beginning with the perfect 25-year-old saver and think it's too late. But it's never too late."

Financial service industry statistics indicate a late start is about average (47% of retirees made contributions towards retirement for 15 years or less). Nearly two-thirds of retirees received retirement advice less than 14 years before retiring. So a catch-up strategy is normal.

Projections showing the advantage enjoyed by that mythical 25-year-old are true. He can achieve ideal retirement on just 10% of monthly salary.

For the same outcome, a 45-year-old would have to save 35% of gross
income.

"This takes discipline, but it's possible," says Gouws. "You can save more than a third of your salary once school and varsity fees have been paid, the house is yours and debts have been settled.

"Your income has never been so unencumbered. So start saving. Cut out useless expenditure and play catch-up for real."

To overcome a retirement shortfall, salary-earners:
* Increase their savings rate
* Choose to take more investment risk for greater returns
* Adjust lifestyle and expenses
* Work for longer than originally planned
* Change their retirement income expectations

"Working for longer or taking well rewarded semi-retirement has become a trend," says Gouws. "The option is facilitated by the country's skills shortage.

"Working longer gives your investments longer to grow. Compounding effects drive most wealth creation. Time is a great risk manager, allowing you to take a little more risk, securing higher returns that can then be compounded.

"The key is not to delay any longer. Set your objectives. Seek professional advice from qualified advisers and develop a holistic plan that considers medical cover, income and life cover and estate planning as well as retirement provision. Late starters have to be smart
starters."

If you would like to start planning for retirement for visit the Justmoney Retirement page and fill in a form so that a trained consultant wan contact you to explain the process.

Recent Articles

Featured Rating agencies may come knocking

It is only the middle of February, but the rand has already made two big moves. The first was the rand moving from R14.60 to R 13.20 at the beginning of the year, as emerging markets (EM) became fashionable again. The second was where the rand gave away nearly 90 cents in 2 weeks as the EM rally ran out of steam, and local events started to hit the headlines.

Read more

The cost of sending money home to neighbouring countries

Transferring money home within the Southern African Development Community (SADC) provides vital financial support for many households in neighbouring countries.

Read more

Student bank accounts: Which come out on top?

Being a student signals budgeting and not having a lot of money at your disposal. This means streamlining expenses such as your grocery costs and entertainment budget. But what if your bank account is in fact costing you more than you can afford?

Read more

Can you afford an ambulance in South Africa?

When a loved one is straddling the line between life and death, you won’t hesitate to call an ambulance. This week, Justmoney found out how much an ambulance ride costs in South Africa, whether you can refuse to get into an ambulance, and who pays the bill if you’re unconscious. 

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

President Hotel Easter Special

Price: From R1,500
When: 15 March to 30 April
Where: Cape Town

Kulula-Preskil Island Resort Special

Price: R16,999
When: 11 May -14 September
Where: Mauritius

A Touch Of Madness Tuck In Tuesday Special

Price: R70
When: Tuesdays
Where: Cape Town