Can you afford to retire in South Africa? Probably not.

Retirement is one of the main reasons we work so hard almost every day because we have something to look forward to. Well – not really.

South Africa’s savings culture is in crisis, with 94% of people unable to retire comfortably, mainly because we underestimate how much we actually need.

Investec financial adviser Kgomotso Motlung explained on the Everything Matters podcast that many people retire only to discover they have saved far less money than they expected.

For example, the R3 million in savings you accumulated over decades of service will last you about 20 years. This means your monthly income upon retirement will be approximately R12 500, which is much less than what you were likely to earn per month and may not even cover your monthly expenses.

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Kate Robson, co-director of Investec My Investments, shared that the general recommendation is to save 20 times your annual salary, given that the average retirement period is 30 years.

Other factors to consider include where and how you plan to live after retirement. Kate urged South Africans to start planning for retirement as early as possible, but also said it was never too late to start.

It’s not all bad news, however. Kgomotso explained how the replacement rate can help make your pension less expensive. This takes into account how much of your current income you will need in retirement, based on expected changes in lifestyle and spending. For example, by the time of retirement; your children will likely be financially independent, and things like the mortgage can be paid off in full.

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However, when you realize that retirement may not be as comfortable, it raises a lot of concerns.

So, perhaps it’s time to think about creating other sources of income that will help you maintain your financial health beyond your retirement savings.

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