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Retirement – a reality check

21 September 2011 Written by Rushil Jaga (Investment Analyst), Samkelo Zwane (Solutions Specialist), and Andries Vermeulen (Business Development Manager: Retirement Fund Solutions) ? Glacier by Sanlam

For many of us retirement planning is not something that is at the top of the priority list. Why would it be? After all, retirement can be up to 30 years away for a new entrant into the South African job market. Often young professionals are more fixated on planning their next overseas holiday or upgrading that old student car they have been driving around in for the past few years. Of course this is a gross generalisation – some may be paying off student loans or even attempting to purchase their first home. Either way you look at it the focus is certainly not on saving towards retirement. How often do you hear people talking about how much they save towards retirement? It may not be the most interesting topic of conversation – but it is an absolutely necessary factor to consider if you want to live comfortably after you retire.

The recently released Sanlam BENCHMARK Active Member Survey 2011 produced some alarming results that showed the inadequacy of individuals planning for retirement. The survey divided individuals by age and prompted them to reveal their savings objective. Quite remarkably, of the individuals in the 25-35 year grouping, only 17% of them are saving towards retirement. Even more shocking is that only 60% of the people 10 years or less away from retirement are saving towards that goal. The same survey hinted that retirement saving is taking a back seat in people’s lives with a staggering 72% of respondents saving 10% or less towards retirement. Research has shown that to replace 75% of your pre-retirement income you need to save at least 22.5% of your pre-retirement income for a period of at least 30 years[1].

The Sanlam BENCHMARK Pensioner Survey 2011 revealed some equally noteworthy results of people already in the post-retirement phase of their lives. The survey revealed that 80% of pensioners have not completely achieved their pre-determined retirement goals. In fact the bulk of pensioners surveyed were forced to reduce their personal monthly income at the point of retirement.


(Click on images to enlarge)

 This drop in standard of living in the post-retirement phase can be attributed to the fact that people have not saved for long enough in the pre-retirement phase. According to the survey, the average retirement age is 58 years. However, the average period of contribution is only 25 years – which leaves 10 years unaccounted for – if it is assumed that first formal employment begins at age 23. It does not take much investigating to tell where the 10 years of saving was lost. This can generally be attributed to the fact that people cashed in their retirement savings during their working careers if they resigned or were retrenched (46.8% withdrew the full benefit in cash).

Receiving proper financial advice is the cornerstone to achieving financial independence and security after retirement - yet many people wait until it is too late. If you are in the pre-retirement phase of your life you still have the opportunity to take corrective measures towards your retirement goals. Remember, start investing as early as possible, start planning for retirement at an early age and become more actively involved in your investment choices.

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1. Samkelo Zwane. Let the Numbers do the Talking. Retirement Matters – June 2011



[1]Samkelo Zwane. Let the Numbers do the Talking. Retirement Matters- June 2011 Publication

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