Back Back


Risks facing retirees

31 Jul 2019

Retirement is one of the most important life events you will experience. However, the majority of South Africans won't be able to retire comfortably as they may not have a sensible long-term retirement plan. Retirement planning should be a core priority in your financial planning. It's also important to understand common retirement risks you may face.

The five most significant and common risks facing retirees include

  1. Investment and economic risks - This happens when your retirement nest egg diminishes due to low or negative investment returns. This is often because of poor asset allocation over a long period, being too conservative or aggressive with your investment selection, or perhaps an unexpected economic event taking place closer to retirement. You can mitigate the impact of this by employing diversified asset allocation.
  2. Income risk - When you retire, and an income or annuity needs to be paid, then volatility can dictate how long your retirement savings can last. Your financial adviser should work with you to implement a solid retirement income strategy to help you maintain a stable income and avoid massive fluctuations in your retirement income.
  3. Longevity or mortality risk - If you consider the fact that people are living longer, you run the risk of outliving your assets. This is a difficult risk to mitigate because you don't know how long you're going to live after you retire. However, you need to ensure that your retirement strategy caters for the long-term.
  4. Inflation and market risk - This happens when the purchasing power of your money doesn't keep up with the rising cost of living. The first step is to ensure that your retirement strategy attracts inflation beating returns. Additionally, there is the risk of losing retirement assets because of economic developments like recession, changes in interest rates, terrorist attacks or political turmoil.
  5. Health risk - This is a big one because if you consider a 65-year-old South African woman might live on average another 18 years after retirement, however only 13 of those years will be healthy, you can see the huge risk the cost of health care and unexpected medical costs present.

How to ensure that you have enough for retirement For the majority of South Africans, a common rule of thumb is that your retirement income should be equal to 60% to 80% of your final salary before you retire. This is merely a guideline because retirement inflation is not the same for everyone and many of us have different priorities, lifestyles and medical needs.

Ultimately though whatever retirement goal setting you decide on in conjunction with your Financial Adviser, here are some points that may assist you in saving adequately towards retirement:

  • Start saving from your very first salary, no matter how big or small that pay cheque may be. When you receive a bonus, incentive or additional income, ensure that you prioritise it towards your retirement savings or at least split it with a percentage going towards your retirement savings.
  • If you can't afford to increase your retirement savings, you may want to look at delaying your selected retirement age to allow your investment time to grow.
  • Re-look at your asset allocation based on your age and time to retirement to avoid being too conservative or overly aggressive.

Liberty believes that the role of a trusted Financial Adviser is fundamental to help you navigate important retirement investing decisions. The adviser must align your retirement goals, affordability and flexibility needs with the right retirement offering. Work with your Liberty Financial Adviser to find solutions that will meet your individual lifestyle needs.

All articles in this newsletter

Liberty's Nurses on the Road

Pioneering positive change

RDR status update

Liberty's focus on education

Risks facing retirees

Lifestyle Protector Wellness Bonus Benefit

Also in this section

Liberty Group Limited (Reg. no 1957/002788/06) is a licensed Insurer and an Authorised Financial Services Provider (no 2409).