Some of the key reasons why so many South Africans will face a bleak reality after their working lives come to an end are affordability and lack of planning. A frightening number of people have not formally planned how they will fund their retirement. Of those who have, few are monitoring their progress. Most don’t know whether or not they are on track to meet their goal to be able to support themselves in retirement, never mind in any comfort. The upshot is that many South Africans pay little attention to their life’s biggest investment.

Something’s gotta to give
There are two reasons people fail to properly prepare for their retirement: complexity and human nature. First of all, the perceived complexity of retirement planning is completely unwarranted. For years, planning for retirement has been cloaked in layer upon layer of technicality and unnecessary terminology. The truth is a whole lot simpler. Forget about the terms, the tax deductibility and all the technicality. In its simplest form retirement planning is nothing more than saving enough capital to fund an income one day when you no longer earn one. It is as simple as that. Obviously, there are products and tax relief that assist you with your planning but they are nothing more than vehicles to get you closer to your

goal of having enough. Secondly, human nature is probably the greatest barrier to people successfully planning for the day they no longer earn an income.

Opportunity costs
It is a well-known fact that you should start saving for retirement as soon as you start working. However, tell the average 20something that they need to follow this tried and tested advice and you are bound to be met with a blank stare or an incredulous laugh. Of course, it is entirely understandable that a young person should feel this way. The thought of preparing for the end at the beginning seems preposterous. Besides, young people have better things to spend their money on and the thought of retirement is the last thing on their minds. But it should be and the truth is that there is no mystery to retirement planning, just the barrier of peoples own human nature. The secret to retirement planning is simple: Save 15% of your gross earnings for your whole working life, invest those savings in a well-diversified high equity fund.
If you fail to plan, you are planning to fail (Benjamin Franklin)
The 2020 Brand Atlas Survey on retirement planning in South Africa found that more than 60% of those who had been (or still were) members of an employer’s

retirement fund said they knew little or nothing about the fund, or were not interested. A key issue that cropped up time and again in the data underlying these first two reports was the perception that people felt they just could not afford to save for retirement. The other side of this argument is that people really cannot afford not to save for retirement. Even before the pandemic, times were tough for many people. Still, treating retirement saving as discretionary spending, as a nice-to-have rather than a necessity, is extremely problematic. People’s survival in their old age should be an essential consideration, not a low priority item.

Facts and figures
The problem of the majority of South Africans not being able to retire with dignity shows no signs of improvement: 49% of people surveyed say they don’t have a retirement plan; last year it was 46%. The number of South Africans who feel good or pretty good about their retirement plan remains very low at 30% (2019: 33%).
The fact is that 69% (2019: 67%) of people surveyed said they had no retirement plan at all, or just a vague idea. This high-lights the need for more education on this topic. A mere 6% of South Africans surveyed said they were executing a retirement plan that they had properly thought through, the same as last year and aligned closely to with National Treasury’s estimate that only 6% of South Africans were on track for a decent retirement.

According to information released by StatsSA in April 2019, 49.2% of South Africa’s total adult population of 35.1 million live below the upper-bound poverty line. Industry guidelines on how long people need to save for retirement vary, but few would disagree that we should be saving for most, if not all, our working life. Unfortunately, this message is not getting through. A large proportion of South Africans believe they can set themselves up for a decent retirement in a relatively short time. This is one reason why people frequently leave it so late, often too late, and almost always miss out on the exceptional benefit of compound growth. Al-most half of South Africans surveyed believe that a comfortable retirement can be achieved by saving for 30 years or less.

Are you on track?
Of the respondents who said they had some sort of retirement plan, 75% were worried about whether they will have enough to live on after they retire or feel unsure about this. This is up from 72% last year. This statistic seems at odds with another in the same survey: 67% of respondents said they expected to be able to preserve their standard of living in retirement. This inconsistency talks to wide-spread confusion about what is required to preserve one’s lifestyle in retirement.
High levels of concern were noted across all income brackets: 76% of those with total monthly household income (HHI) of less than R20k said they felt concerned or were unsure about having enough money in retirement, as did 76% of those with a HHI between R20k and R50k, and 72% of

those whose HHI was upwards of R50k per month.

Get real
This underlines once more that achieving a financially secure retirement is less about how much we earn, and more about how much we engage in the process, inform ourselves, and save. This data, remember, is for respondents who said they do have a retirement plan. This shows that having a plan is not enough. It also needs to be effective and realistic, and there needs to be follow through. A workable plan requires a specific goal and strategy to achieve it. This is easily deter-mined with the help of a Financial Advisor who will help you calculate how much money you need to retire comfortably, and how much you need to save on a monthly basis, to get there.
The sense of realism created by so many respondents acknowledging the likelihood they will need to continue earning an income in retirement is somewhat undermined by the fact that 68% of respondents said they expect to enjoy the same or similar standard of living when they retire. The notion that 75% of respondents worry about having enough to live on after they retire and 77% expect to need some additional income, yet 68% anticipate they will be able to maintain their standard of living just doesn’t add up. People do not seem to connect the dots between investing now and preserving their lifestyle in retirement. There also seems to be little acceptance that retirement is an inevitability, rather than a choice. In an economy where the unemployment rate hovers at

around 30% even before the pandemic, there is pressure on older people to retire, even more so because of South Africa’s bottom-heavy population pyramid. In an ideal world we would all be happy to hand over the reins and step into retirement when the time came. In reality, many will have to work longer than they would like to, while others will be forced to stop working before they feel ready, psychologically or financially.

To have or have not
For most, retirement is a vague concept that looms in the distance, mostly ignored and rarely in focus, until suddenly it is upon them. A longed-for moment for many, the eagerly anticipated unshackling from full-time employment and the prospect of more leisure time can quickly be overtaken by worry and a sense of futility, brought on by a lack of routine, of purpose and adequate income. In the end, much of the longed-for free time is spent fretting about unexpected bills and money management. But it does not have to be that way, at least not the financial aspect. A properly thought-through retirement savings plan put in place early in a working life and revisited and adjusted annually would make retirement a very different experience for most.

The road to ruin …not saving
Disturbingly, 18% of respondents fail to save because they have no plans to re-tire. While this is a commendable sentiment, it is, of course, not entirely up to them. No one is, by force of will, immune to ageing, incapacity or redundancy. If it were otherwise, there would also be no need to take out medical insurance as no one plans to get sick. Saving for retirement is effectively that: insurance against outliving our working life.
The data shows that many South Africans prioritise their current lifestyle, at great expense to their future selves. It is a terrible trade-off because what they might gain in the short-term (5-10% more take-home pay) is dwarfed by the prospect of a 50-90% decline in lifestyle post retirement. That, invariably, is what happens when people leave their saving too late, or don’t save at all.

In conclusion: if only youth knew, if only age could
Many South Africans face a bleak retirement, financially at least, and nothing in the Brand Atlas survey suggests that this situation is changing. As was the case last year, only around 6% of respondents felt comfortable with their retirement prospects.
Some of this is down to economic hardship; it is simply impossible to save without a minimum level of income. More than half the respondents indicated severe financial stress, which would make retirement saving difficult, especially during the current economic crises.

Beyond that, it is not just an income issue, though, because people in the low, medium, or high-income brackets are equally worried about making retirement ends meet. Rather, it is a savings problem that is rooted in the widespread lack of retirement planning, which in turn manifests hubris and unrealistic expectations, financial ignorance and ill-discipline, and disengagement from the funding process.
Around 40% of respondents believe their retirement can be funded within 25 years, seemingly oblivious to the importance of compounding returns. This helps explain why more than 60% of members of corporate pension schemes cash in their fund on leaving their employer. And why for so many South Africans saving for retirement is just “not a priority at this stage”, as though they can make it up later. Realistically, they cannot. A savings plan that delivers a 60% income replacement ratio after 40 years of saving would replace only 30% of final income after 25 years. These people would have to save twice as much, to make up the shortfall. It would require a massive, and improbable cut-back to their accustomed lifestyle. Along similar lines, two out of five respondents under the age of 35 expect to retire before age 60, oblivious to the fact that retiring early not only cuts into their saving years, but also adds to the years those savings must last. These are all illusions that some timeous retirement planning (or basic financial education) early on in their work life would quickly dispel. But apparently the preferred route is to have those illusions shattered by reality.
So, who should read this? Twenty-somethings, but they won’t!