South Africans can’t afford to retire

It’s a grim reality that many South Africans may need to continue working even after their official retirement age. National Treasury recently revealed that only six out of every 100 South Africans can afford to retire comfortably.

This has been echoed by a report from Genesis Analytics in collaboration with the Financial Sector Conduct Authority (FSCA), which reveals that 90% of South African retirees are unable to maintain the same standard of living they enjoyed before retirement.

Sanlam’s recent benchmark survey shows that 25% of the roughly 500 full-time workers who participated have no form of retirement savings. Add to this the fact that South Africa’s life expectancy has shown a steady increase.

According to Statssa, the life expectancy for South Africa in 2023 is 64,88 years — a 0,39% increase from 2022.

The average retirement age in SA is still 60, but many other countries are increasing their formal retirement age to as high as 70. Worldwide, more and more people are returning to the workplace after retirement to support themselves, and it seems this won’t be any different for South Africans.

In SA, citizens and refugees aged 60 and above, without any income or social grants, receive a monthly pension of R2 090.

However, a recent report from the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) shows that the average cost of a household’s food basket in Pietermaritzburg for September was significantly higher — at R4 942,94 — making it difficult for pensioners to cover their basic food expenses.

Pietermaritzburg financial expert Dheran Ghela said that it is “a sad reality that only six percent of South Africans will be able to retire comfortably”.

He urged people to have a Plan B income. “While working, try to start a side business using your skills, maybe on a contract basis, to secure an income even after you retire. It’s unfortunate, but a reality is that most of us will have to carry on working even in our retirement,” he said.

He also advised everyone to start saving towards their retirement from the first day they start working.

Ghela said it is important to teach people financial education, emphasising the vital role that the Education Department and schools must play in teaching children about the importance of saving and practical saving strategies.

Ghela said it is concerning how people prioritise immediate gratification over long-term financial security.

“People are willing to pay as much as R1 000 a month for a fancy cellphone rather than saving that amount for their retirement. That just shows us how much people lack financial literacy.”

He also warned retirees to use their pensions wisely.

“We’ve seen people blow their retirement savings in one go and they are then left with nothing, especially those with provident funds which pay out lump sums. That’s why the government has changed it from a provident fund to pension fund because with a pension fund people continue to get a portion of their salaries even after retirement.”

Nicole Govender, a clinical psychologist, said a large number of retirees suffer from financial anxiety.

She said the primary contributor to this anxiety stems from insufficient or depleting retirement savings.

“Insufficient savings often lead to stress and anxiety as retirees grapple with the worry of meeting financial needs during retirement. Health-care costs are also a significant concern for seniors, and unforeseen medical expenses can intensify their financial anxiety.”

She said financial anxiety in older people can lead to many other health issues, including depression.

While the extension of life expectancies is generally positive, Govender said, it can contribute to financial anxiety as seniors confront the fear of outliving their savings.

Govender said financial literacy is a crucial factor in empowering people to make informed financial decisions. “Unfortunately, many seniors lacked access to comprehensive financial education during their formative years and struggle to adapt to the ever-evolving financial landscape, exacerbating their financial anxiety.”