Alexander Forbes notes that South Africa has one of the worst savings rates in the world of just 15.4% of gross domestic product (GDP) – meaning it has more of a debt culture than a savings one.<\/p>\n
The group told journalists at its head office in Sandton on Tuesday 6 November, that while the industry has won several battles, it continues to lose a few in getting people to save for retirement.<\/p>\n
In South Africa, the firm says that approximately 5% of people retire with enough income to be comfortable. The aim of most retirees is to receive about 75% a year of their final annual salary when they retire.<\/p>\n
The rule of thumb is that you should consistently save between 15% and 20% of your monthly salary while you are aged 20 to 60 to retire comfortably.<\/p>\n
The below graph shows the multiple of salary that a member needs to have saved to ensure that they are on track to get a reasonable replacement ratio at retirement.<\/p>\n
For example, a 40 year old member would need to already have saved just over three times the current annual salary to be on track for a 75% replacement ratio at retirement, Alexander Forbes said. “This is a very useful rule of thumb for members at all ages to follow,” it said.<\/p>\n
Deciding to retire at the age of 65 rather than the age of 55, can almost double the replacement ratio that a member can achieve.<\/p>\n The graph below shows the impact of retiring at various ages for a new member aged 25 contributing at 11.75% of salary.<\/p>\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2018\/11\/AlexanderForbes.png\")
<\/a><\/p>\n