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Planning and dedication required to meet retirement goals

20 July 2017Malusi Ndlovu, Old Mutual
Malusi Ndlovu, Head of Old Mutual Corporate Consultants.

Malusi Ndlovu, Head of Old Mutual Corporate Consultants.

Saving to retire comfortably is not a cliché

Low consumer confidence aside, the recently released 2017 Old Mutual Savings and Investment Monitor showed an increase in the number of individuals utilising provident or pension funds (51% to 53%) and retirement annuities (25% to 30%) between 2016 and 2017. While this highlights that more South Africans are understanding the value of saving for retirement, only the right financial provisions will ensure that retirees can remain financially stable during their golden years.  

Malusi Ndlovu, Head of Old Mutual Corporate Consultants, says that careful planning and dedication is key to live their desired lifestyle during retirement. “While the figures from the Savings and Investment Monitor are hopeful given current challenging economic times facing South Africans, many members need all the assistance they can get from employers to reach these goals.” 

He points to research from Old Mutual Corporate’s 2017 Retirement Monitor, released earlier this year in March, which revealed that Human Resource Officers are the most widely accessed point of advice on retirement and employee benefits, followed by friends and family. Ndlovu says that employers are therefore one of the most important influencers in helping members make better financial decisions. “Companies should start considering how they are able to support their employees with the necessary education, structures and guidance so that they can achieve their targeted retirement outcomes.” 

Ndlovu says that while more members may be seeing the value of using a company’s investment vehicle to save towards retirement, the more concerning issue is that the average household wealth in the country is actually declining in real terms. “South Africans have a high propensity for debt, a concern confirmed by the Old Mutual Savings and Investment Monitor, which suggests that 16% of household income is spent on debt.

“To put into perspective, an increase in the cost of monthly consumer debt, such as home loans and car repayments, further decreases the average wealth held by South African households, leaving even less money for retirement savings. But, while incomes are stretched now, households will only become more vulnerable in retirement if retirement savings measures aren’t implemented as soon as possible,” says Ndlovu.

Ndlovu warns that just because it appears that more members are using provident and pension fund, and retirement annuities (RAs), it does not mean they will definitely have a better retirement outcome than those not saving, but it illustrates how having an investment vehicle in place, can create more financial security. “It is then crucial these retirement fund members are communicated on how to effectively ensure they are in fact saving enough for a comfortable, secure retirement.” 

Ndlovu concludes: “With better health care and a longer expected life span, many South Africans may very well find themselves working longer than they had originally planned, despite saving for retirement. However, by having a ‘golden years’ goal and making sound contributions to a retirement fund you can retire at 65 and still have the financial resources to sustain the lifestyle you love.”

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