There is no such thing as a free retirement
There is no doubt that the high fees charged by some players in the asset management industry are a contributing factor to South Africa’s retirement crisis.
However, at some point, we each have to look in the mirror and take some responsibility for the mess we are in. It is pointless to keep blaming others.
The responsibility falls on us to ensure that we know what we are getting ourselves into regarding our retirement investments.
Many South Africans wait until it is too late before they start asking questions. Many of them discover at the 11th hour that fees have consumed the lion’s share of the growth on their retirement savings.
The popular saying that there is no such thing as a free lunch rings true in South Africa, as elsewhere. Everything comes at a cost, and then we are taxed on almost every item we consume.
That said, it is very concerning that (as shown by the recent 10X Investment Retirement Reality Report 2022) a staggering 15% of members of corporate retirement savings funds believe that the company that manages their fund doesn’t charge a fee for the service. Another 41% have no idea how much they are paying in fees.
Some say ‘ignorance is bliss’, but this saying doesn’t ring true when it comes to your financial choices, especially retirement savings.
The legal principle, ignorantia legis neminem excusat (ignorance of the law excuses no one), meaning that being ignorant of a law does not excuse a person from liability should they break it.
Similarly, with retirement saving, saying you didn’t know is just not a good enough excuse. Rather make it your business to find out.
In this day and age with widespread access to technology and information, cheaper data and easily available financial tools, people should be able to educate themselves on what their retirement investments entail.
It is our responsibility to ensure we ask the right questions about key factors, especially about fees, which is an important determining factor in retirement saving success.
Of those retirement savers in the RRR2 who do know (or at least believe they know) what they are paying in fees, 22% said they were paying between 2 and 4%.
That so many are happily paying 4% of their savings away in fees suggests that many individuals don’t understand the implications high fees have on their chances of reaching their retirement goals.
Trimming fees would make a huge difference because just 1% saved in fees every year would mean as much as 30% more money at retirement.
No one is going to save us from the retirement mess that we are in, and the proposed regulatory changes will not be a fix-all.
We need to do our part too. We cannot continue outsourcing our retirement outcomes and/or blaming our failures on our employers, advisors, or financial institutions or anyone else.
There is no such thing as a free lunch in retirement saving, as in life.
The content herein is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice. 10X Investments is an authorised FSP (number 28250)
Loading ...