FINANCE: 90% Of SA Workers Not Saving Enough for Retirement
Recent Gauteng Business News
Eight of every ten new global clients taken on by deVere in 2016 were not saving enough in order to be able to have a comparable lifestyle in retirement, shares Nigel Green, founder and chief executive of the financial advisory firm.
In initial meetings with clients we do detailed analyses of their current financial situation. We discuss the age at which they would like to retire and how much money they would need to save during their working lives in order to achieve this – living a lifestyle they desire in retirement – typically a comparable one to the one they enjoy now.”
Last year only 20 per cent of new clients were putting enough aside to realise their own long-term financial goals of retiring at an age they want and having enough money to last throughout their retirement.”
Local figures, revealed by deVere Acuma’s head of Africa, Gavin Smith are as high as 90%.
He says this reflects a ‘live for today’ attitude which is, perhaps, even more evident in South Africa, where economic conditions have caused many people to focus on current financial priorities rather than long term goals. As South Africa has one of the worst savings rates in the world and high household debt to income, a focus on saving for retirement is critical.
“We are living longer, meaning the money we accumulate has to last longer,” he shares. “In the future, it’s unlikely that governments will be in a position to support older people like they have done for previous generations and suggests it intensifies the promotion of a savings culture.
This, together with increased healthcare needs of the aged is resulting in a looming health and social care crisis. There is also an increased burden on individuals to save for retirement as deficits in company pension schemes grow.”
Smith says people often think they will save at a later stage, but once they get near retirement age, they may not be able to work longer due to ill health, lack of career opportunities, or because they need to look after sick or elderly relatives.
If we don’t change our savings culture, many of today’s working population will have to significantly downgrade their lifestyle and/or continue working longer than they had expected and hoped, due to a lack of retirement savings.
The optimal percentage of income which should be put aside for retirement depends on a variety of factors, including age and when you started saving. But in general terms, deVere Group suggests that people aged between 25 and 34 should be saving 15 to 25% of their income, those between 35 and 44 should save 25 to 35%,and those aged between 45 and 54 should be putting away 34 to 45%.
People of 55 and over may need to save considerably more, depending on their age, their savings to date and their personal and professional circumstances.
The financial advisory industry has a role to play by working to restore the public’s confidence in the wider financial services sector. Once there is trust, more people are likely to actively seek professional financial advice, which will considerably increase their chances of being financially secure in retirement.
“Whatever stage you are at in your working lives, the time to start saving is now”, says Smith, “as the earlier you begin, the easier it will be to reach your long-term objectives.”
It is never too late, and there are financial solutions that help you secure financial freedom in retirement at whatever age you are.
Business News Sector Tags: Finance|