The re­al­ity of when you can ex­pect to re­tire

Cape Argus - - MONEY -

AC­CORD­ING to pop­u­lar ad­verts mak­ing the rounds on TV and ra­dio, the first per­son to live to 200 has al­ready been born.

While this may seem a bit un­be­liev­able, the ad­vances we are see­ing in medicine and diet, plus the adop­tion of much health­ier pas­times and ex­er­cise regimes, has def­i­nitely led to longer life ex­pectan­cies.

Jac­ques Brown, a wealth man­ager at Pri­vate Client Hold­ings, said that added to this was the fact that so­cio-eco­nomic con­di­tions had also changed. Peo­ple were get­ting mar­ried and hav­ing chil­dren later than the pre­vi­ous gen­er­a­tion. Chil­dren were stay­ing de­pen­dants for longer than be­fore as en­try into the job mar­ket had be­come in­creas­ingly dif­fi­cult. Dayto-day liv­ing ex­penses have es­ca­lated.

“This all puts strain on the aver­age per­son’s abil­ity to save. Costs associated with re­tire­ment, such as re­tire­ment homes, elec­tric­ity and gro­ceries, have also es­ca­lated, and of course med­i­cal ex­penses climb as we age,” ad­vised Brown.

“Added to this, re­turns on in­vest­ments have de­creased from be­fore. We do not see the same re­turns on the aver­age bal­anced fund as be­fore due to tepid re­turns on the lo­cal and world mar­kets, as well as low re­turns on prop­erty in­vest­ments. This would mean that peo­ple sav­ing for re­tire­ment have to save more cap­i­tal in an environment where there is less sur­plus in­come. This also means that peo­ple in re­tire­ment have to tighten their belts.”

Ac­cord­ing to Brown, in the fi­nan­cial plan­ning in­dus­try there are al­go­rithms, for­mu­lae and elec­tronic tools that are used to help peo­ple plan their fi­nances so that they can save for re­tire­ment, the aim be­ing that they don’t run out of money in re­tire­ment.

“For that we ask them at what age they would like to re­tire, what their sav­ings amounts are and what in­come is needed in re­tire­ment. We then use cer­tain as­sump­tions, such as in­fla­tion and growth rates, to work out whether the client will have enough to re­tire or not, and man­age ex­pec­ta­tions.

“How­ever, the chal­lenge here is fac­tor­ing in ever-in­creas­ing life ex­pectan­cies. From a fi­nan­cial stand­point peo­ple will have to work for longer in or­der to save for a longer re­tire­ment – the seven­ties are the new six­ties. I would imag­ine that fu­ture gen­er­a­tions would then have to work into their eight­ies to save for their re­tire­ment.”

If we take a typ­i­cal pro­fes­sional per­son who leaves school at the age of 18, stud­ies, takes a gap year, starts earn­ing enough money at the age of 28 to start sav­ing and has a new life ex­pectancy of 108. If they were to re­tire at the age of 63, that means they only have 35 years to save for 45 years of re­tire­ment.

“I’m re­minded of some clients of mine, years ago, who were in their nineties and down to their last sav­ings.

“The client said to me ‘I sim­ply never thought I would live to be this old’.” | Sup­plied

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