The earlier a person starts saving, the easier it is and the more they can put away for a comfortable retirement.
Research by Liberty shows that half of all working South Africans aren't putting any money away for their retirement.
An investigation into our savings habits shows that most people only start to think about retirement savings once they are over the age of 40.
"Having a comfortable retirement or being in a position to live life the way you want at a certain age should rate as an important life goal for everybody of working age. Unfortunately, South Africans are not getting to this point until they get older," says Nosipho Nhleko, Liberty Investment Specialist.
The numbers show that only 31% of people aged between 30 and 35 have established a proper savings plan. By the ages of 45-49 this figure jumps to 63%. This shows that South Africans become financially wiser as they get older, but it also indicates that too many South Africans are setting up their savings plan when it may already be too late.
"The fact is, the earlier a person starts saving, the easier it is and the more they can put away for a comfortable retirement," says Nosipho.
Saving in an approved retirement fund such as a retirement annuity (RA) gives you significant tax breaks - your contributions are tax deductible (subject to specified limits), your money will grow 'tax-free' in the RA and when you retire, up to R500,000 of the lump sum you take may be tax free with the balance of the lump sum taxed in terms of preferential tax tables. Your annuities will be taxable at your marginal tax rate in the same way that your current salary is taxed.
RAs are portable (i.e. not linked to your employment), have no contribution limits and your retirement benefits can be accessed from the age of 55.
The most common reasons given for not having an RA include a lack of knowledge and perceptions of affordability.
Liberty's research indicates that 59% of South Africans without an RA feel that they cannot afford one. According to Nosipho, this perception is not always accurate, as even small amounts can be saved monthly to create a retirement fund.
Every circumstance is different and partnering with a Financial Adviser is the best way to plan your own personal financial journey. So, if you want to know how much you can save by putting money into an RA every month, speaking to an expert is the best option – and you might find that it is not as expensive as you thought. Better yet, you will be saving your money in a very tax efficient manner while securing the life you aspire to.
This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice.
The material has been created for information purpose only and does not contain any personal recommendations. While every care has been taken in preparing this material, no member of Liberty gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy, or completeness, of the information presented. Please consult your Financial Adviser should you require advice of a financial nature and/or intermediary services.
Liberty Group Limited is a Licensed Life Insurer and an Authorised Financial Services Provider (no 2409).