The simple fact is, if you want a comfortable retirement you cannot leave the planning to someone else. If you sit back and hope that your company pension will somehow provide enough to give you the retirement you desire, you are likely heading for disaster. Research has shown that as many as 94% of South Africans do not make sufficient provision to enjoy a comfortable retirement. As a result, they need to continue working in their retirement years, or depend on family members for support.
The financial pressures to provide for a financially secure retirement are increasing because:
- People are living longer, which means that they need more money at retirement.
- Many people are retiring at an earlier age, again necessitating greater provision for their retirement years.
- Inflation affects the buying power of retirees' incomes and this is exacerbated by the fact that people are living longer. It is therefore important for people to have sufficient funds to provide for inflationary increases in their income after retirement.
- Many companies have stopped paying medical aid contributions for retirees because of escalating costs. This has forced individuals to make their own provision for medical costs after retirement.
The cost of delay
Putting off starting to build a retirement nest-egg is very costly indeed. The earlier you start making provision for your retirement, the better. The graph below illustrates how much you will need to invest at different ages to reach a goal of R1 000 000 at retirement. Please note that this is for illustrative purposes only. The graph is based on an investment return of 10% p.a. after charges.
The message is clear: the longer you delay funding for retirement, the more you will need to save later in life to ensure a comfortable retirement.
Retirement solutions you should consider