South Africans are not prepared for retirement, with several studies and surveys showing that we need to save more – and start sooner – if we want to maintain a decent standard of living in our later years.
BusinessTech has run two polls looking at how South Africans are preparing for retirement – specifically focusing on the age that people start saving for retirement and how much of their monthly salary they put away.
The results of both polls, which drew a combined 10,000 responses, echoed several research documents which have shown that South Africans are severely under-prepared for their golden years.
A recent Global Investor Study by Schroders found that South Africans were under-saving by six percentage points, when looking at what they expected to get out of retirement savings, versus what they were putting away.
The study showed that the percentage of their monthly salary South Africans think they should put away to have a ‘comfortable’ retirement is close to 20% – however, saving trends indicate that they are only putting away 13%.
There is also a gap between what non-retired people believe should be put into investments (10%), compared to what retired people have actually allocated (27%).
“South African retirees are receiving a much lower proportion of their final salary in retirement (59% on average) than people approaching retirement think they will need to live comfortably in their golden years (80% on average),” Schroders said.
The trends seen in BusinessTech’s polls are also of great concern, and reflects data in the Sanlam Benchmarks Survey which found that people were saving too little for retirement, while also starting too late.
The majority of respondents (55%) in the poll said that they put less than 10% away for retirement each month. Sanlam found that the average savings rate is 7% – compared to the suggested minimum of 15%.
While most respondents (45%) said that they had started saving for retirement in their 20s – the balance was starting ‘too late’, with a sizeable portion (20%) saying they started in their 30s, and 16% started after the age of 40.
Worryingly, 19% said that they were not saving for retirement at all.
According to Sanlam, South Africans are starting to save five years too late – kicking off their savings at 28, when it should have started at 23.
A person’s retirement savings are deemed adequate if they can replace at least 75% of their final income when they retire – but this something only 8% of retirees achieve, the group said. That leaves 92% of South Africans with inadequate retirement savings.
“While saving late is better than not saving at all, unfortunately, leaving retirement saving until you are nearing your 50s and 60s is likely to be too late to make up a savings gap,” Schroders said.