It is no secret that we live in an economic climate that is trying to say the least. This however, has resulted in very few people being able to save, making affording a decent retirement increasingly challenging. This ultimately puts a strain on South Africa’s social welfare budget, stated First National Bank (FNB).
“In this year’s National Budget, social assistance was projected to increase from R129 billion to R165 billion by 2018/19. In a tough economy where the Government needs to prioritise cost-containment, working citizens need to improve their efforts to save for retirement,” added FNB.
Though it is inevitable, retirement tends to be a subject many put on the back-burner.
“In spite of tax efficient investment vehicles which offer incredible benefits, South Africans continue to show poor commitment towards saving for retirement. This, of course, is indicative of consumers’ general attitude towards saving or investing, hence our modest national savings rate of 15.4% to the GDP. Equally concerning is World Bank statistics which show that South Africans are among the top borrowers in the world, meaning that people tend to rely on debt to fund the cost of living.
“We are all familiar with cases of people who are forced to use their limited retirement savings to pay-off debt. This is not ideal because by the time a person retires; they should’ve settled all their debt commitments,” said Preenay Sathu, channel head at FNB Financial Advisory.
Many of the associated risks however, could have been avoided through some of the following steps, explained Sathu: “Review your retirement plans and set goals. If you haven’t, consult a goal-based financial adviser to help you. Further explore tax-efficient solutions to boost your position and remember that the more you save, the better your retirement position could be.”
In addition the South African Government has been working towards implementing restrictions in aid of protecting your retirement savings. These limits could “restrict how much people invest in investment vehicles considered higher risk and encourage much needed diversification,” said FNB.
“Our country is going through an economic cycle which makes it harder for people to consider saving for retirement due to pressures of the high cost of living. However, saving for retirement is not something that should be delayed because it’s incredibly tough to catch-up,” said Sathu.
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