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The state of the South African retirement crisis

15 November 2018Just Retirement Life

A guaranteed income for life and leaving money for children and grandchildren are the most important needs for South Africans when reaching retirement. This is according to Just Retirement Insights, independent research commissioned by Just in which South Africans between the ages of 55 and 85 years in the major metropolitan areas were interviewed.

When it comes to income in retirement, 89% of survey respondents wanted a guaranteed income for life (up from 86% in Just’s 2015 survey). The second most important aspect for 53% respondents (up from 44% in 2015) is leaving an inheritance for their children and grandchildren. However, statistics from the Association of Savings and Investments South Africa (ASISA) show that 92% of retirees currently invest in living annuities, which do not cater for both needs as these products typically do not provide a guaranteed income. This unfortunately means that running out of money becomes a reality in later years and, as a result, the likelihood of being able to leave a legacy is severely reduced. However, there are unique retirement solutions which seek to address both these needs simultaneously.

The Just Retirement Insights survey indicates that people’s expectations of how much retirement income they will receive do not match reality. This is concerning, considering that most people are not saving enough for retirement in the first place, which means their pot of assets available at retirement is not sufficient to begin with. The average rand value of survey respondents’ retirement funds is R1,8 million, and the anticipated average monthly income is R12 000. However, a typical couple retiring – for example, a male aged 65 with a female spouse aged 61, who will receive 75% of the income upon his death – requires R2,2 million, or 22% more, to secure that level of income for life, with future increases in income targeting inflation.

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