Is “Comfortable Retirement” A Pipe Dream For South Africans?

Is “comfortable retirement” a pipe dream for South Africans?

Retirement is a pleasant daydream for many of us. Visions of leisurely mornings reading the newspaper, afternoons indulging our hobbies, weekends playing with grandchildren and the odd little adventure are often at their most seductive first thing on a Monday morning. Unfortunately, a recent survey by personal loan provider Wonga suggests that up to 50% of South Africans will not be able to afford the retirement they are envisioning.

Wonga’s new research polled a representative sample of 8,000 South Africans, exploring the topic of financial wellbeing. The study asked questions about financial priorities, future plans, and current fiscal behaviors. The interviews revealed the troubling statistic that less than half of South Africans will have saved enough to retire comfortably.

The retirement saving shortfall

The majority of respondents planned to retire between 50-70 (a conventional age bracket for retirement in South Africa). However, a mere 50% of participants claimed that they were actively saving for their post-employment future. This figure points to a significant retirement saving shortfall, which will exclude many South Africans from the retirement they are hoping for.

Why aren’t South Africans saving?

There are many factors at play in the Rainbow Nation’s retirement saving shortfall. Short-termism with regards to finance, high costs of living and low levels of financial education are amongst the most pressing issues. This new research suggests that many South Africans are simply not aware of the level of saving which is required to ensure a comfortable retirement. Of those polled, only 44% stated that they hoped to have saved at least ten times their annual salary for retirement.

Short-termism and high living costs are interrelated issues. Rising unemployment, high petrol prices, increasing food prices; it’s more and more expensive for South Africans to shoulder day-to-day costs, let alone put away money each month.

As a nation with particularly high levels of consumer debt, these difficult-to-manage everyday expenses are exacerbated by a “buy now, save later” mentality which is still pervasive in South Africa. 46% of respondents claimed they wanted to save but were unable to do so due to financial constraints. A further 52% state they would like to repay their debts but are currently unable because of high demands on their finances. Given this personal financial climate – and the country’s wider economic uncertainty – it is a little wonder than saving for
retirement is a challenge for many individuals.

The long view: Youth and Retirement

With 62% of youth (compared to 54% of adults) planning to retire before the age of 60, it may appear that younger people have unrealistic expectations of their future. Encouragingly, however, more young people are actively saving for their retirement than one may expect. 30% of young people are currently putting money into savings for retirement (although only 48% plan to have ten times their annual salary saved by the time they exit the world of work).

These figures may be hopeful, but they still suggest that a significant shortfall awaits many South Africans when it is finally time to take retirement.

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