Only 6-8% of people can retire comfortably in South Africa, according to National Treasury. It’s a frightening stat and one that is widely used to create fear amongst South Africans. Fear that a good retirement is out of reach for most people.
This fear-mongering creates the perception that normal people must go to exceptional lengths to amass enough retirement capital. But it’s untrue. And unhelpful. In our recent Retirement Re-imagined workshop, it pained me to again hear so many worries about what to do to retire well.
Salary earners should be able to retire well enough by simply saving every month throughout their careers. But herein lies the rub. The truth of it. We don’t save enough.
The poor stat touted by all in South Africa’s retirement services is the result of a poor savings culture, not a lack of opportunities. There are plenty of opportunities – we have a strong, developed financial system, even allowing savers to invest their money overseas should they not believe that South African investments can produce adequate returns (and talking about adequate returns, even a mediocre balanced fund or index investment would have produced an adequate return for South African savers, well above inflation, over the past fifteen years).
Apart from the data, I also know from my experience that it is possible. I see those clients in my office. Those who have saved enough through ordinary savings products so that they have enough for retirement. And we can also tell with reasonable accuracy whether you’re on the right track if you’re still in the accumulation phase. It’s not just wild guesswork. There’s reliable historical data and software to help you understand whether you’re on target and what you can do if you’re not.
Those who undermine the belief in the financial system, who decry its ability to deliver significant benefits to the general population, don’t do them a favour. Don’t blindly believe what they say. Don’t just react. In my experience, those who do, don’t turn to save elsewhere, they just stop saving. In which case, they really won’t have enough. It’s time we say to people, it’s ok to do the unexceptional thing by saving in ordinary investment products.
Of course, it would be better if your savings could grow at better compound rates and again, that’s not complicated either. Take risk and stay invested. But that’s a topic for another day.
In the meantime, you don’t need to do anything fancy to retire well. You can invest in mediocre funds in ordinary savings products according to a plan. But you must save enough. For a long time. Consistently. And then hold onto those savings. And in retirement, withdraw according to a plan. So that you will not be part of that stat.
You don’t need to fear, just save with a plan.
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//02 July 2021