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Only 6% of South Africans have enough retirement savings

ONE of the key findings of 10X Investments’ 2023/24 Retirement Reality Report is that many people who should know better are not planning well enough for retirement.

10X Investments CEO Tobie van Heerden says though many are not in a financial position to save for retirement – 70% of respondents said they could not afford to save –  what is shocking was that of those who are in a position to save but are not doing so adequately.

Van Heerden, for example, the report found that while 37% of those surveyed – but who could afford to save more – assumed their retirement financial planning was on track. In reality, only 6% had a well thought-through plan that they were executing on.

He points out there is a contradiction in 37% believing they are saving enough but only 6% actually making sufficient provisions.

Van Heerden says people should start saving for retirement as soon as possible. This will go some way to ensuring they are better prepared for retirement.

“It takes a typical earner, saving 15% of income from the day they start work and preserving their savings when they change jobs, about 40 years to build a large enough nest egg on which to retire comfortably for 30 years,” the report says.

The knock-on-impact of not saving early can be huge. If you are part of the 37% who mistakenly think they are well-prepared for retirement and aged 50 years, you would have to put away 40% to 50% of your income to be part of the 6% who are well-prepared.

Beware the fees

Aside from not saving enough, South Africans are also largely unaware of the impact of the high fees charged by those who administer their retirement savings are having on the size of their retirement nest eggs.

“A small difference in fees can make a huge difference to your final lump sum,” says the report.

For example, 10X Investments found that on an investment of  R10 000 invested for 40 years, you will only receive R370 000 if the fee is 3% a year. In contrast, if the fee is 0,5% for the same investment, you will get R1,24-million.

Take advantage of compound growth

Van Heerden says not structuring your retirement plan in a way that taps into the market’s compound growth over a long period is also a mistake many make when it comes to planning for retirement. 

He advises people to invest in high-growth investments at the start of their careers rather than more conservative products.  

Though the rise and fall in valuations of high-growth investments might seem risky, van Heerden points out that these types of investments are highly regulated to prevent reckless trading. 

He advises people to switch to lower-risk portfolios when they get closer to retirement.

When you started late

For those who want to better prepare for retirement, van Heerden suggests they start increasing the amount they pay into their retirement products. 

Another thing they can do is take whatever increase they are getting for the year, and instead of having it paid out into their salary, have it go directly to their retirement investments.

Van Heerden, however,  is not blind to the difficulty of forgoing a salary increase.

“When you get more money, you are just tempted to spend it.”

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