Retirement is a Reality, not a Choice

The annual 10X Investments’ Retirement Reality Report (RRR20), released last week, is one of the most significant surveys published in a long time. It is of specific importance to financial advisers who face the difficult task of having to convince clients to prepare for the inevitable.

Earlier this year, the Old Mutual Savings & Investment Monitor showed that a staggering 58% of South African households are facing high or overwhelming financial stress as the Covid-19 crisis knocks savings and raises debt levels. The just-released survey data also draws attention to the long running retirement saving crisis and helps to foster a better understanding of how existing vulnerabilities have been magnified by the global pandemic.

Like last year, just 6% of respondents in the new RRR20 felt comfortable with their retirement prospects, yet most seem to think their savings shortfalls will follow the novel coronavirus and, in the words on Donald Trump, “disappear … like a miracle”. It is therefore hoped that the RRR20 will broaden the discussion on the steps needed to improve the situation that continues to be downplayed by some and ignored by the majority.

What did the 2020 survey reveal about retirement planning?

49% of people surveyed say they don’t have a retirement plan (2019: 46% /2018: 41%)
The number of South Africans who feel good or pretty good about their retirement plan remains very low at 30% (2019: 33% / 2018: 38%))
69% (2019: 67%/ 2018:62%) of people surveyed said they had no retirement plan at all, or just a vague idea.

An alarming finding is that a large proportion of South Africans, almost 50%, believe they can set themselves up for a decent retirement in a relatively short time and believe it can be achieved by saving for 30 years or less.

Are those that do have a plan on track?

Although 75% (2019: 72%) were worried about whether they will have enough to live on after they retire or feel unsure about this, 67% of respondents said they expected to be able to preserve their standard of living in retirement. The inconsistency between these two figures indicates the widespread confusion about what is required to preserve one’s lifestyle in retirement.

Furthermore, most survey respondents (77%) believe they will have to generate some income after they retire and only 6% of respondents believe they are on track.

How are retirement experienced and seen by different age groups?

“One thing that these Retirement Reality Reports make more clear every year is that one of the biggest problems around retirement planning, or the lack of it, is unrealistic expectations,” according to the report. The research results suggest that retirement planning for most people is “a nebulous, even fantastical thing, a problem for another time”.

Whereas some 40% of respondents under 35 believe that retiring below age 60 is achievable, only 9% of over 50s believe they can retire before age 60.
Amongst the younger group (between ages 25 and 49), on average, only 37% expect to work past the age of 64, among those 50 years and older, more than twice as many (69%) have wised up to their retirement reality and plan to retire at age 65 or older.

“The lack of proper retirement savings is rooted in the widespread lack of retirement planning, which in turn manifests hubris and unrealistic expectations, financial ignorance and ill-discipline, and disengagement from the funding process” – states one of the conclusions of the report. This is where the role of the financial adviser cannot be over-emphasised.

The survey reveals a substantial number of opportunities for financial advisers. We will focus on some of these, including changing perceptions over time, the importance of retirement planning specifically for women, and the needs of those who have already retired. We will be covering these in more detail next week, but suggest you study this 19-page document to assist you in helping your clients help themselves.

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