Retirement? Most South Africans can forget about it

The 2019 Old Mutual Savings Monitor shows that many South Africans continue to earn some kind of income after they retire. It found that for every R100 these retirees receive, more than half (R56) is derived from post-retirement earnings.

The monthly contribution from a pension or retirement savings for nearly 80% of retirees makes up only 27% of their income, with other investments or savings contributing only 7%.

Retirees included in the survey were from a sample that had retired formally with income of R15 000 or more each month.

Two conclusions can be drawn from the fact that they have chosen to continue working past retirement age:

1. They had not saved enough for retirement;
2. They had underestimated the income they would be getting in retirement as well as their expenses.

This worrying trend ties in with the 10X South African Retirement Reality Report, where less than 50% of respondents were aware of how much money they could expect in retirement.

Skill sets dictate jobs in retirement

Lynette Nicholson, research manager at Old Mutual, says the types of jobs vary between industries and depend on skill sets. “For example, retired teachers may now be offering tuition classes for students while more creative types are turning their hobbies into an income source by venturing into fields such as furniture refurbishment.

“Those with accounting or book-keeping skills are likely to offer their services to smaller businesses such as hairdressers or beauty salons.”

Nicholson says the survey results show that half of retirees are working for an employer, 36% have started a business post-retirement, and 13% have continued to be self-employed or taken up positions as consultants.

Christo Botes, executive director of Business Partners, says many of those entering retirement are still in their prime and remain both physically and mentally fit, and capable of participating in business many years into their retirement.

“Not only are recent retirees able to remain active, but they are also equipped with a wealth of knowledge and experience that can be beneficial for a new business venture.”

Botes adds that there are a numerous benefits for those starting their entrepreneurial journey in their late 50s to late 60s. “Older entrepreneurs have the advantage of the experience of managing teams successfully, stronger business networks, and are better skilled to execute business plans, all of which aid in running a successful business.

“A senior entrepreneur may also be more financially secure than younger entrepreneurs and have an alternative source of income, such as non-retirement savings that have been accumulated during their working life. This financial security can make the financial risks of starting a business less salient,” he says.

Sandwich generation

Fifty-three percent of retirees are still supporting dependent children and grandchildren, and of those, 41% are supporting dependents under the age of 12. In an attempt to cope financially, these retirees are cutting down on their expenses by spending less on clothing and shoes (45%), holiday and travel (41%), eating out and entertainment (39%), electricity and water (38%), entertaining at home (37%) and cellphone airtime (36%).

Nearly two-thirds of their income is directed toward living expenses, with 14% going to savings and 10% towards insurance and medical costs.

Most retiree households – 83% – have an emergency fund of some sort. Nearly 80% hold this in a bank savings account, with 35% having these funds unbanked or in cash. Nicholson says most surprising of all is that 14% admit to having a stash of cash that their spouse or partner is not aware of.

Why South Africans are so unprepared for retirement

Steven Nathan, chief executive officer of 10X, says it all goes back to a lack of planning, where as many as 45% of respondents began planning for retirement only after becoming established with partners or having children, while just 22% began planning at the beginning of their careers.

While the impact of saving early cannot be overemphasised, this is compounded by poor decision-making at the time of retirement. Nicholson says only 4% of respondents make the recommended choice to leave their pension or provident fund lump sum intact and opt to receive a monthly pension.

“The 21% of respondents who took the entirety of their pension in a lump sum are potentially worst prepared for the future,” she says, adding that 75% took a portion as a lump sum and the rest as a monthly pension, leaving them in a slightly better position.

By the time a person reaches retirement, they should have reduced or cut out all debt – but as many as 49% of the retirees surveyed still use a credit card, 51% a store card and 23% still had vehicle finance agreements that needed to be paid.

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