Few bright spots in 10X’s latest Retirement Reality Report

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“Generally gloomy” – that’s how 10X Investments describes the findings of the sixth edition of its annual report on retirement planning by South Africans. But the 2023/24 report does draw attention to some bright spots.

Overall, the latest report shows there has been little fundamental change in South Africans’ inclination or ability to plan for retirement compared to the findings from previous reports. Some two-thirds of South Africans are not saving for retirement, or their retirement plan is vague. The remaining third have a relatively solid grasp of what is necessary to fund their retirement years.

By “retirement plan”, the report means a considered and documented savings and investment strategy that will enable savers to accumulate enough money by the time they retire to maintain their standard of living in retirement.

Although the percentage of respondents who said they could not afford to save for retirement dropped from 74% in 2022 to 70% in 2023, it is higher than the 2021 figure (64%), which shows that the average consumer is still battling financially.

The 20% of respondents who answered “It is not a priority for me at this stage of life” may be in the position to save if they wanted to but choose to spend their income elsewhere. This number dropped to 20% last year, from 21% in 2021, and remained constant in 2023.

Forced to retire early

A significant trend that has emerged over the past three reports is that fewer South Africans are retiring when they want to. The percentage of respondents who said “I was forced to retire before I wanted to” increased from 29% in 2021, to 34% in 2022, and to 37% in 2023.

10X Investments said this trend reflects the challenging economic times, indicating a rise in employers who compel their older workers to take early-retirement packages.

Planning for retirement, or not?

A bright spot in last year’s survey was that a steady increase in people having no retirement plan whatsoever had reversed. In 2021, 50% of respondents indicated did not have a plan. This improved to 46% in 2022 and remained at that level in this year’s survey.

The respondents with a solid grasp of their retirement planning (“I have a pretty good idea of what I’m doing” and “I have a thought-through plan which I am executing”) decreased from 33% to 29% between 2019 and 2021, but rose to 31% in 2022, remaining at 31% in 2023.

Of the respondents who do have a retirement plan, only 37% could give a definitive answer on the costs, as an annual percentage of assets, of their retirement investments. Another 37% had no idea what the costs on their investments were; 13% believed that the fee depended on performance; while 13% believed they were not being charged at all.

About 50% think their plans are on track

About half of the respondents who have a retirement plan indicated that their plans were “probably” or “definitely” on track, with some variation across the age groups.

Significantly, 29% of people over 50 indicated that their plans were “definitely not” or “probably not” on track. As 10X pointed out, it is extremely difficult to correct a deficit in savings after reaching 50. At that stage, it will require at least 30% to 40% of a monthly salary to be invested into retirement savings to retire comfortably.

Almost three-quarters of respondents (72%) whose plans were not on track gave “I am not able to save enough” as a reason. This ties in with reasons given for not having a retirement plan in the first place: 70% of respondents without a plan agreed with the sentence: “I cannot afford to save. I have nothing left over at the end of the month.”

The other reasons given for retirement plans not being on track included: “I started too late” (36%), “My retirement investments are underperforming” (14%), “I miscalculated the contributions I needed to make” (14%), and “High fees have eaten into my retirement plan” (9%).

Misplaced optimism?

Further to the issue of being on track for retirement, 10X drew attention to the finding that only 35% of retirees who have saved for retirement indicated they were “fairly” or “very confident” that their savings would last.

Forty-one percent were “not confident” or “not at all confident, and 22% were unsure.

A further 2% of people who saved for retirement indicated that they have already run out of savings.

10X said these results makes one question the optimism of people saving for retirement who are confident they are on track. “Some may be sorely disappointed when the reality of retirement hits.”

Women’s financial health

Women have consistently been rated lower than men in most metrics concerning financial well-being and retirement planning in the Retirement Reality Reports.

Half (49%) of all female respondents to the survey indicated that they do not have a retirement plan, compared with 43% of men. More than double (11% versus 5%) the number of men than women said they were diligently following a well-conceived retirement plan.

This and past reports show that women are more cautious than men when it comes to saving and investing: more women than men are “savers” (30% of women versus 26% of men), while the reverse is true for “investors” (24% of men versus 14% of women).

According to 10X, although a prudent, cautious approach to investing is admirable, it may ultimately be to women’s detriment, because only higher-risk investments, such as listed equities, can deliver inflation-beating growth over the long-term.

Enough in retirement?

Compared with the 2021 survey, there has been a decrease in respondents who are concerned about having enough money to live on in retirement. Those who agreed partially or strongly with the statement “I worry about whether I will have enough money to live on after I retire” dropped from 67% to 62%, while those who disagreed partially or strongly rose from 21% to 25%.

10X said this finding appears to contradict the finding relating to the percentage of savers who said they were on track with their retirement plans. Why would more than 60% of respondents be worried about having enough to live on in retirement when about 50% of them indicated their retirement plans were on track?

10X said the possible answer is that many people may be incorporating income from some form of post-retirement employment into their plans.

Year after year, a large proportion of respondents have been partially or strongly of the view that they will need to continue earning a living after their formal retirement date: 77% in 2020, 74% in 2021, and 71% in 2022 and 2023.

“The six percentage-point drop since 2020 is another positive statistic in an otherwise generally gloomy survey,” 10X said.

Click here to download the Retirement Reality Report 2023/24.