PSG Wealth head of actuarial and product Jan van der Merwe has shared five tips to help minimise the risk of insufficient savings in retirement.<\/p>\n
The main takeaways from van der Merwe\u2019s suggestions are to start saving early and save 15% of your salary \u2013 compound interest will do the rest.<\/p>\n
In partnership with the Financial Sector Conduct Authority (FSCA), a report from Genesis Analytics showed that 90% of South African retirees couldn\u2019t sustain their standard of living before retirement, and two-thirds of members have less than R50,000 in their retirement fund.<\/p>\n
\u201cIt is clear that South Africans are not saving and investing enough,\u201d said van der Merwe.<\/p>\n
Tips on how to save more for retirement<\/strong><\/p>\n To minimise the risk of insufficient savings in retirement, van der Merwe says the rule of thumb is to save at least 15% of your salary during your working years.<\/p>\n \u201cIt can be challenging to make the necessary adjustments if you are saving less than 15% of your salary for your years of retirement, but delaying saving until you have \u2018enough\u2019 money is sure to end in failure,\u201d he said.<\/p>\n He added that you are far more likely to succeed if you prioritise investing and allocating money to your long-term goals before you are tempted to spend on more pressing needs.<\/p>\n The tips van der Merwe suggests to help create a good savings foundation for yourself and build towards that 15% marker are:<\/p>\n \u201cOver time, these small adjustments and sacrifices will gradually and consistently add up, thanks to compound interest,\u201d van der Merwe said.<\/p>\n The table below, provided by van der Merwe, illustrates the exponential gain achieved the sooner you start saving. It assumes returns are compounded at 8% per annum.<\/p>\n As the table shows, if the saving period is increased to 15 years, you could end up with almost double the amount you set aside.<\/p>\n Van der Merwe also noted the importance of the product type you choose when saving for retirement and the underlying investments in the product.<\/p>\n \u201cSaving for retirement can be done via your employer\u2019s retirement fund arrangement, perhaps enhanced by a retirement annuity (RA), and if you don\u2019t have an employer scheme, then an RA is also ideal,\u201d he said.<\/p>\n Van der Merwe also suggested taking advantage of a tax-free savings account to maximise what you get out for retirement.<\/p>\n There are several choices when it comes to the underlying investments you select. For example, there are unit trusts and share portfolios. The key factors to consider in this context are:<\/p>\n\n
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\n Amount saved per month<\/th>\n No. of years<\/th>\n Total savings<\/th>\n Total savings + interest<\/th>\n Amount gained in interest<\/th>\n Total accumulated as a percentage of total savings<\/th>\n<\/tr>\n \n R1 000<\/td>\n 5<\/td>\n R60 000<\/td>\n R72 945<\/td>\n R12 945<\/td>\n 112%<\/td>\n<\/tr>\n \n R1 000<\/td>\n 10<\/td>\n R120 000<\/td>\n R180 124<\/td>\n \u00a0R60 124\u00a0<\/span><\/td>\n 150%<\/td>\n<\/tr>\n \n R1 000<\/td>\n 15<\/td>\n R180 000<\/td>\n R337 606<\/td>\n R 157 606<\/span><\/td>\n 188%<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n
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