Gen Zs have better opportunity for financially secure retirement

A retirement plan is one of the safest financial nets people can have to ensure they live comfortably even after they stop working.

The 10x Retirement Reality Report reveals that at least 6% of South Africans will be able to afford to retire comfortably.

Asavela Gwele, Investment Consultant at 10X Investments says Gen Zs (born between 1997 and 2012) face difficulty when it comes to saving adequately for retirement, as they do not have the best example set by the prior generations.

However, she believes Gen Zs can still make the best financial decisions as they have more information at their disposal.

Most people don’t save for retirement

The report released in March this year is based on a comprehensive survey by Brand Atlas. It focuses on South African’s behaviour and knowledge concerning their retirement planning.

Brand Atlas tracks and measures the lifestyles of the universe of 15.4 million economically active South Africa. For this specific survey they used those living in households with a monthly income of more than R6 000, aged over 16 and with internet connection.

“These households account for 30% of total households in South Africa, but contribute 80% of
household income and expenditure. The data are weighted to reflect the profile of this universe, as defined by Unisa’s Bureau of Marketing Research in their 2019 Household Income and Expenditure report.”

“The inaugural report made it clear that South Africa was sitting on a retirement time bomb, with the data aligning closely with a widely quoted National Treasury statistic that only 6% of the country’s population was on track to retire comfortably.”

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Some of the reasons behind the country’s saving habit include that people had not formally planned for retirement. The few who had planned for retirement were monitoring their progress, unsure whether they were on track to be able to support themselves in old age.

The Covid-19 pandemic, high interest rates, high unemployment and a failure on the part of the government to stimulate economic growth, are listed as some of the key reasons. 

No improvement in planning to save for retirement

The report reads there has not been any significant positive change from the previous surveys. “Roughly two-thirds of adults are either not saving at all or their retirement plan is vague.”

The report reveals that 72% of the respondents said their plans to save for retirement were not on track. Their reasoning for this was they were not able to save enough. “This ties in with reasons given for not having a retirement plan in place, with 70% of respondents without retirement plans agreeing they do not have enough money.”  

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The report shows that 49% of female respondents do not have a retirement plan, compared with 43% of males. “This and past reports show that females are more cautious than men when it comes to saving and investing,” reads the report.

30% of females said they value savings, compared to 26% of males. While 24% of males identified themselves as investors, compared to 14% of females. “Although a prudent, cautious approach to investing is admirable, it may ultimately be to women’s detriment, as only higher-risk investments, such as listed equities, can deliver inflation-beating growth over the long-term.”

Young people planning for retirement

The report says those under the age of 55 believe they will retire younger, while those over the age say they will need to retire later in life.

“17% of respondents older than 50 years indicated they did not plan on retiring, pointing to a lack of planning and the necessity to continue working for a living. Although the percentages are low, more respondents below 35 years of age than those of 35 years or older indicated they plan to retire before turning 60.”

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The report believes this may be because of the idealism of youth and a lack of awareness among younger people on what it takes in the way of planning and savings to retire comfortably.

Gen Zs have time on their hands

Gwele says that Gen Zs have time on their hands to make informed financial decisions as they have started to work at a younger age, with a lot of information available. There has been an international trend called ‘Soft Saving’, whereby Gen Zs do not believe in saving for a long period, they prefer spending their money on experiences.

“If you can match what you save up for your annual holiday and add that to your retirement savings,” she says. Gwele believes that Gen Zs have an opportunity to break South Africa’s cycle of poor retirement savings, especially those who were fortunate enough to land themselves a job straight out of graduating.

“Gen Zs are entering the workforce at a time when there has never been a greater variety of financial products and relevant financial information available. If they can leverage the best of those products and take in the information available then they can give themselves a good chance at a comfortable retirement.”

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