What is the Shape of Your Retirement Plan?
- Published on 18 Oct 2013
- HR Pulse News Desk
Most South Africans do not plan adequately for retirement. The upcoming Retirement Expo, aims to show how retirement can be a time to look forward to, provided you start or boost your retirement strategy and savings now.
This is according to retirement experts set to participate in the expo from 25 – 27 October at the Coca-Cola dome in Johannesburg.
The expo is aimed at everyone over 45, says Lynn Chamier, general manager of event organiser Thebe Exhibitions & Projects. She says 45 is the perfect age to be thinking seriously about retirement plans. “15% of South Africans don’t plan on ever retiring, while another 15% plan to retire but don’t save for it and 41% believe they’ll have to work after the age of 65.”
Planning for financial freedom
Dawie Roodt, chief economist of the Efficient Group notes that increasing life expectancy means that people entering the workplace now could reasonably expect to be retired for almost as many years as they worked, assuming they retire at age 60. With birth rates falling in developed countries, and states under pressure to support pensioners, the real responsibility for providing for a comfortable income on retirement will rest with the individual, he says. “Currently, the state pension in South Africa is around $155 per month on average. In the US, it is around $670 and in Australia, it is $1560. Another factor is that the South African official pensionable age is 60, compared with around 65 in wealthier nations, while the cost of state provided pensions in South Africa is just over 1% of GDP.” 93% of South Africa’s population above the age of 60 receives a social pension.
To sustain the living standards they are accustomed to after retirement, people should look to a financial portfolio that meets their appetite for risk, and is regularly adapted in line with changing market conditions, says Roodt.
Roodt points out that simply taking out a retirement annuity is not necessarily the way to optimise returns on savings. “When deciding on an investment, it is important that you understand it fully. A good investment is not simply about getting the best return – it is a matter of finding the best ratio between return and risk that suits the investor. In the current environment, borrowing to invest in your business - not for consumption - could provide the best returns.” Another misconception is that paying off debt is always a good way to secure future income. However, Roodt commented that: “the cost of servicing a mortgage is quite low currently, while there are good returns on the JSE at the moment. Sometimes it makes better sense not to pay off debt, but to invest instead, or at least, have a balanced approach towards the right kind of debt and savings.”
Careful financial planning is important at all ages, but is particularly important for the so-called ‘sandwich generation’ says Thebe Exhibitions & Projects. This generation - generally adults in the 40-plus age group, is burdened with providing support for both their children and their ageing parents. This double burden makes saving even more challenging.
