Why you need to plan for a longer retirement

Janice Masencamp

As life expectancy rises and quality of life improves, South Africans are facing the pressing need to ensure financial security post-retirement.

According to Debt Care, to maintain your lifestyle after retirement you will need at least 15 times your annual salary as a safe cushion.

However, a recent report by The 10X Investments Retirement Reality Report 2023/2024 found that the majority of South Africans have not formally planned for retirement and those who have planned are not confident that they are on track to be able to support themselves for the long-term considering inflationary pressures and the economic climate.

Janice Masencamp, Head of Retirement Fund Consulting at financial advisory firm NMG Benefits, says that while there’s no mandatory retirement age in South Africa, retirement age is often written into employment contracts, and employees need permission from their employers to keep working beyond that age to be able to sustain their lives and those of their dependents.

Studies suggest people who work longer retain higher levels of energy and mental awareness and retain a continued sense of purpose and belonging. However, for most ‘unretirees’, the biggest advantage of staying in the workforce is the ability to generate additional income and having more years to save towards retirement.

“By working for only four extra years, post-retirement income can increase by about 10%. By working for an additional 10 years, this income can almost double,” says Masencamp.

Now, that we live for longer, we’re getting to a point where we should start planning as if we’re going to live to 100. This will impact the way we do financial planning. And those who don’t have enough retirement savings will keep working until they’re no longer able to,” says Masencamp.

South Africans need to start actively planning for retirement as early as possible. This includes speaking to a financial planner, to help navigate the numerous options for investing your retirement income based on your personal needs, especially with the implementation of the ‘two-pot’ system. A planner will help you understand your various options and alternatives when it comes to deciding to withdraw or not, and what the ramifications of those decisions will be.”