Most regret not saving for retirement early

FEW SOUTH Africans start planning for retirement young and the majority say they regret starting late.

Only 22 percent of respondents in 10X Investment’s first annual Retirement Reality Report (RRR), released last month, began planning for retirement at the beginning of their careers. And more than 50 percent of respondents said they would do it differently if given the chance to start over.

10X commissioned Brand Atlas to expand its annual survey of the South African population to gather the data to create the report.

Brand Atlas samples the universe of 11.9 million economically active South Africans as determined by Statistics SA (namely those with a monthly income in excess of R7 600) through online completion surveys involving more than 1 million South Africans.

Only 7 percent of those surveyed said they had a proper retirement plan and were executing it.

“The fact that 41 percent of respondents said they don’t have a plan at all underlines the scale of this crisis,” said Christopher Eddy, a senior investment analyst at 10X Investments. It is more than a little worrying that the situation has not improved much, if at all, over the past 20 years, despite the existence of a large and financially successful retirement savings industry,” said Eddy.

Almost half of respondents (46 percent) began planning for retirement only after becoming established with partners and as parents. This means that many will have missed out on years of potential compound growth, that could have been achieved through consistent savings contributions.

“The benefits of starting to save early cannot be stressed enough,” said Eddy. “It can be very difficult to start saving for retirement when you are just starting out at work, and retirement seems to be light-years away.

“But starting out early and putting a little away every month and leaving it to grow over the decades is so much more manageable than starting late and trying to catch up.”

The following example illustrates how powerful compounding is. Imagine you start saving at age 25 and put away R12 000 a year (equivalent to R1 000/month) and then for some reason you need to stop saving at age 40, perhaps to divert money towards the cost of children or property.

Your friend starts saving much later in life and saves the same R12 000 a year for the next 30 years, until you both retire. At that point, all else being equal, you’ll have more money than your friend, even though you contributed only half the money, over half the number of years.