It’s worse than death: Cash-strapped South Africans terrified of retirement

South Africans fear retirement more than death, according to a new survey where 40% of participants indicated that retiring is a more terrifying prospect for them than passing on.

The Debt Rescue survey, conducted among 1 900 South African citizens aged between 25 and 65, paints a picture of apprehension and challenges surrounding retirement.

High cost of living impacts retirement savings

It also highlights the significant fears and challenges people face right now in securing savings for their retirement along with prevalent concerns about the high cost of living, unemployment and personal debt.

“This is in line with findings from the 2023 Old Mutual Savings and Investment Survey (OMSIM) that shows that retirement does not feature among the top financial priorities for those surveyed,” Neil Roets, CEO of Debt Rescue, explained.

“In 2023 income security (63%), cutting expenses (58%) and paying debt (52%) are the most prioritised, while only 33% of respondents ranked securing their investments and 34% creating an emergency savings fund as a priority.”

Shock finding: Most South Africans have no retirement savings plan

Another alarming insight from the Debt Rescue Survey is that a whole 59% of people participants admitted that they are completely unprepared, having no savings or plan for retirement, while only 4% felt they were fully geared up for retirement, despite almost half (47%) of South Africans listing a comfortable retirement as their primary savings goal, according to the Old Mutual survey.

“This means that more than half of South African adults will either have to retire later than planned, not be able to retire at all, or will have to rely on their families to support them through their golden years. If anything, this highlights the need for more accessible avenues for retirement savings,“ Roets said.

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Retiring comfortably not even a high priority for most

Farzana Botha, segment manager at Sanlam Risk and Savings, said being on track to retire comfortably took seventh place in a list of eight defined priorities in a recent Sanlam retirement survey.

“For young people in particular, it is just not a consideration right now, showing the vital need for retirement planning to be reframed to be more relevant.”

On a more positive note, Roets said that just more than half of the Debt Rescue respondents (51%) have some form of plan or annuity in place.

However, when participants were asked about their confidence in their retirement savings sufficing for a comfortable lifestyle, 40% were not confident at all, while only 24% were extremely confident.

Roadblocks

The roadblocks to saving for retirement were overwhelmingly led by the high cost of living, with 63% of respondents indicating it is their primary obstacle, followed by unemployment or unstable income (16%) and high personal or household debt (12%).

According to Roets, a commendable 51% of respondents professed a strong understanding of retirement savings options, such as pension funds, retirement annuities and provident funds, suggesting a fair level of awareness. In terms of funding mechanisms, personal savings (28%) and employer-provided pensions (24%) were the most cited means for future retirement funding.

“Another concerning insight is that only 21% of people start saving for retirement in their twenties and this drops to 13% for people in their thirties and to 4.3% for people in forties. There are good reasons to start putting away money towards a retirement fund as early in life as possible.”

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The sooner you start saving for retirement the better

Roets said the earlier you start saving for retirement, the sooner you can begin capitalising on the effects of compounding returns.

There are also many immediate tax benefits and if you are employed, you can begin saving for retirement by using your employer’s retirement plan. These plans reduce your taxable income, investments grow tax-deferred and you can double the money through employer matching contributions. 

Seek sound financial advice

“Of course, we understand that South Africans struggle to meet daily costs, never mind setting aside money for retirement savings. My advice is to consult a financial adviser who can guide you on how to make a smart investment, no matter how small, that can help you make your money grow.”

According to Roets, a sound financial management plan is another way to gain greater control over your finances and cultivating a habit of saving for the future, even starting off with just a few rands a month, can set you on the road to a comfortable retirement. 

“The reality is that many South Africans are simply not able to put money away right now because of the relentless cost-of-living increases they had to absorb over the past few years and are relying on credit just to make it through the month,” Roets concluded.