Half of South African retirees plan to rely on their children if they run out of savings: study

Retirement income specialists Just has published a new survey focusing on the saving habits of South Africans, showing that a large number of people expect to rely on their children and grandchildren should they run out of retirement savings.

The study is based on face-to-face interviews with over 520 pre-retirees and retirees which aims to understand the local retirement market in a changing economic and political climate.

Respondents ranged between the ages of 50 and 85 years old, living in Cape Town, Durban and Gauteng.

The key findings of the study revealed several major challenges facing today’s retirees, arising from common misperceptions of retirement income.

These key findings include:

• 81% of respondents indicate a strong preference for a stable monthly income in retirement that covers their expenses, rather than one that fluctuates depending on investment performance. Many cannot tolerate the risk of a decline in investment markets;

• Half of the respondents said they would rely on children or grandchildren should they run out of money, yet paradoxically they also shared the belief that it is important to leave an income legacy for the next generation;

• Eight out of 10 respondents said that they set and worked towards financial goals, while 60% of respondents acknowledged putting more thought and planning into their finances (a 20% increase from 2018). Yet, when asked if they had done any retirement budgeting, over half (53%) admitted that they had not calculated how much they would need per year and just under half (48%) lacked confidence that their money would last;

• 80% have less than R2 million in retirement savings and more than half of these expected a monthly income in retirement that is significantly higher than the sustainable income that can be purchased in the market.

“Our key concern rising from this latest study is the high proportion of people approaching retirement who have not saved enough, yet expect an unrealistically high level of income from their existing retirement pot,” said Just CEO Deane Moore.

“Few people realise that they can sustain a 2.5% p.a. higher level of income in retirement, and guarantee this for life, by using a life annuity or a lifetime income option within a living annuity.

“It highlights the important role of careful planning to help make informed decisions around the effective use of limited resources.”

Read: What South African investors are worried about right now