Older people are returning to work as unretirement trend grows

The good news is that we live longer than ever before and are enjoying a better quality of life while we do. The bad news is that less than 10% of South Africans have enough money to retire, which means many older people are working for longer just to make ends meet.

All over the world older people are flooding back to work to supplement their incomes or simply stay busy and it has a major impact on retirement planning, says Janice Masencamp, head of retirement fund consulting at employee benefits advisory firm NMG Benefits.

Statistics SA data shows that the life expectancy of South Africans increased from 59.9 years to 64.6 years for men and from 67.2 to 71.3 years for women between 2002 and 2020. At the same time, the Pew Research Centre says the number of people living to 100 years and older is expected to grow to nearly 3.7 million by 2050, from just 95 000 in 1990.

The challenge lies in funding this new-found longevity. South Africans are notoriously light on their retirement savings and according to Sanlam’s benchmark survey report, one in five consumers say they will never be able to retire.

NMG figures show that the average replacement ratio for retirees declined from 35% in 2019 to 32% in 2021. This means the average member of a retirement fund can expect an income of 32% of their pre-retirement salary after they stop working.

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Rules of retirement and unretirement

“South Africans are not very good at saving or planning for their retirement at the best of times. Now, as we live for longer, we get to a point where we should start planning as if we will live to 100 and align our goals accordingly.

“This will have a major impact on the way we do financial planning, while those who do not have enough retirement savings will keep working until they are no longer able to,” says Masencamp.

Legally, there is no mandatory retirement age in South Africa, but a retirement age is often written into employment contracts and employees need permission from their employers to keep working beyond that age.

There are clear benefits for employers to have older, more experienced employees in the workforce because they have valuable skills, knowledge and experience which can be passed on to younger generations and therefore, the unretirement trend has benefits for employers.

Various studies show that people who work longer retain higher levels of energy and mental alertness, reduce their chances of cognitive diseases such as Alzheimer’s 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.

She warns it is also crucial that working South Africans start actively planning for retirement as early as possible and this includes speaking to a financial planner, who can help navigate the numerous options for investing your retirement income based on your own personal needs, especially with the new ‘two-pot’ system. Unretirement must be a choice, not a threat.