Why you should never cash in your retirements savings
Arecent survey conducted by Sanlam f o u n d many employees are unaware of the effects of cashing out their retirement savings when they change employers, and many pensioners said they now regret doing so, says Viresh Maharaj, chief marketing actuary at Sanlam Employee Benefits.
The research included responses from 100 stand-alone funds, 100 employers participating in umbrella funds, 503 active members and 250 pensioners.
“Almost half of all active members and more than half of all pensioners indicated that they did not understand how this seemingly innocuous decision would negatively affect their ability to create lifetime wealth. With the benefit of hindsight, they indicated that they now regret their decision to cash in their savings,” says Maharaj.
He says assuming a young person changes jobs every five years and opts to withdraw their retirement savings each time they switch employers, the research shows that had they preserved these savings from the start of employment, they would have close on 16 times more wealth at retirement compared to the amount they would have built had they cashed it in.
“Better communication is required of employers to equip employees to make better decisions when they change jobs. 63% of respondents who cashed in their savings reported that they used the cash to settle debt ranging from credit cards through to mortgage bonds,” Maharaj explains.
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