Financial health lessons from a pandemic
It’s no secret that we are a nation of poor savers. Almost half of the South Africans surveyed (49%) in the recent 10X Retirement Reality Report 2020 (RRR20) admitted they didn’t have a retirement plan.
Only 6% said they had a plan that they were sticking to.
These numbers highlight the gravity of the situation and make it clear why 10X talked of a ‘retirement crisis’ when they started their research in 2018.
South Africans are however not blind to the consequences of not having a proper retirement plan and savings in place. In fact, 76% of those with a household income (HHI) of between R20 000 and R50 000 felt concerned or were unsure about having enough money in retirement. Nearly three quarters (72%) of those whose HHI was more than R50 000 per month had the same concerns.
“This indicates that people across the board are nervous about their retirement. Our spending is too high and our savings or investments are too low, regardless of which income group we fall into,” says Karabo Ramookho, Strategic Retail Marketing Manager at Old Mutual.
No fewer than 77% of the 10X RRR20’s survey respondents believe they will have to continue generating an income after they retire. In a country where the unemployment rate is 30%, there is pressure on older people to retire, particularly because of South Africa’s overall young population.
Of course, nobody could have predicted the Covid-19 pandemic and its economic fallout, which prevented many people from working or earning an income, giving them no choice but to get into debt if they didn’t have an emergency fund.
The lessons learnt were painful, but may ensure that many more South Africans will take steps to strengthen their long-term finances, reassess what’s important, scale back and plan properly for the future.
Hear Ipeleng Swedi, Senior Consultant at OMCC,
talk about retirement age
and how it affects your pension.
So what can you do today
to ensure a financially healthier tomorrow?
Simplify your lifestyle and become a savvy saver and investor
Do a lifestyle audit and ask yourself whether you really need that fancy car, big house or international holiday. Rediscover life’s simple pleasures, like baking, gardening, and hiking in the great outdoors. Join the new world of side hustles by learning how to make money from your hobbies. Review your budget and find areas where you can cut back. Then channel the money saved into an emergency fund (of three to six months’ salary) and retirement funding.
Limit your stress to improve your health and finances
About half (49%) of people who earn between R20 000 and R80 000 per month are experiencing high to overwhelming financial stress, according to the Old Mutual Savings and Investment Monitor Covid-19 Special Report. During 2020 28% fell behind on credit card payments, 35% missed store card payments and 20% skipped their home loan/rent.
“Stress can lead to ill health, which can in turn force you into early retirement and increase your stress levels further. It’s a vicious cycle you want to avoid. Take positive action and seek help from an accredited adviser. Together you can put a financial plan in place that addresses your needs and gives you peace of mind,” says Karabo.
Prioritise investing in your future (especially if you’re a woman)
The RRR20 reports that an increasing number of women (53%) say they don’t have a retirement savings plan. This is up from 51% in 2019. Considering that women make up more than half (51.1%) of our population and tend to live longer than men, this is a grave concern. Women often earn and save les than men too. Taking time off work to care for children can also set women further back financially. So it is imperative that women make a plan to invest for a brighter tomorrow.
Take advantage of tax breaks
The South African Revenue Service (SARS) provides tax relief if you are investing for your future. Make use of the concessions available to reduce your tax bill. Consider increasing your contributions to your current employer sponsored retirement fund or a retirement annuity. You can also take advantage of a Tax-Free Savings Account, which allows you to save up to R36 000 a year (with a current contribution limit of R500 000 over your lifetime) without paying tax on the growth of your investment (capital gains), the interest or dividends.
Speak to a financial adviser today
to help you plan for a brighter tomorrow.
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