I was reading the open letter that Blackrock recently published, and what caught my attention was the fact that they highlighted some very important information pertaining to life expectancy and retirement. Don't outlive your retirement savings! And this is what I want to share with you today.
Increasing Life Expectancy
Since 2010, South Africa has seen a steady 12% increase in life expectancy. This significant rise is a testament to advancements in healthcare and improved living conditions. However, it also means that South Africans are living longer and, consequently, will need more financial resources to sustain themselves during their extended retirement years. Dont outlive your retirement savings
Global Aging Trends
Globally, there has been an 82% increase in the number of people above the age of 65 over the past five years. Additionally, from 2010 to 2021, there was an astounding 88% increase in the number of people who have turned 100. These trends are a clear indication that people are not just living longer but are also maintaining longevity well into advanced age.
The Implications for South African Retirees
These statistics reveal a critical challenge: ensuring that retirement savings are sufficient to cover an extended period of life. Unfortunately, many South Africans do not save adequately for their retirement. This shortfall can lead to financial insecurity in the later stages of life when the ability to generate income is limited.
Bridging the Retirement Cashflow Shortfall
To address this looming issue, it is essential to adopt a proactive approach to retirement planning. Here are some strategies to consider:
Start Saving Early: The earlier you start saving, the more you benefit from the power of compound interest. Begin with retirement savings as soon as possible, even if it's a small amount.
Regularly Review and Adjust Savings Goals: Life circumstances and financial markets change. It's important to review retirement savings plans regularly and make adjustments to ensure they remain on track to meet retirement needs. Stretch yourself, and don't think that the annual contribution increases will be sufficient, because it will not.
Pension & Provident Funds alone: If your employer belongs to a group arrangement, you will contribute towards it as well. It does certainly help to have it in place, but a Pension or Provident fund alone, will not ensure that you have enough to last you throughout your golden years. Make additional provision.
Diversify Investments: Diversification can help manage risk and improve returns over time. Consider a mix of stocks, bonds, and other investment vehicles to build a robust retirement portfolio.
Tax Advantages: Retirement annuities and tax free savings accounts, provide the investor with tax advantages. The earlier you start in life, the more the benefits will be. Speak to your advisor about it.
Consider Longevity: With people living longer, it's vital to plan for a retirement that could last 20, 30, or even 40 years. This may require adjusting the savings targets upward to ensure sufficient funds are available throughout retirement. You don't want to outlive your retirement savings.
Seek Professional Advice: Financial advisors can provide personalized advice and strategies tailored to individual circumstances. Regular consultations can help clients stay on course and adapt to changing financial landscapes.
Conclusion
The increasing life expectancy in South Africa and the global rise in aging populations highlight the pressing need for adequate retirement planning. By taking informed and proactive steps today, South Africans can secure their financial futures and enjoy a comfortable and dignified retirement.
Speak to your financial planner about retirement planning, or give us a call to discuss?