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New research shows how a focus on surviving present difficulties crowds out planning for the future when even a small sacrifice today would yield significant improvements later.

The 2022 edition of the 10X Investments Retirement Reality Report (RRR22), released on September 30, shows the retirement prospects of South Africans worsening as people focus on more immediate financial pressures brought on by the pandemic and containment measures. We can now add rising prices and interest rates to that too.  

10X’s fifth annual report into retirement readiness in South Africa lays out how many people can simply not afford to save. Their numbers are growing: 70% of respondents without any sort of a retirement plan say there is simply no money left at the end of the month (up from 64% last year, and 56% the year before).  

On the plus side, the negative trend in the number of South Africans proactively anticipating their retirement reversed a little this year. 46% of people polled don’t have a retirement savings plan of any kind, down from the 50% reported last year.  

Tobie van Heerden, Chief Executive Officer of 10X Investments, says: “Even for those who do have some sort of a retirement plan, focusing on near-term circumstances that are largely beyond their control likely condemns them to living in perpetual financial crisis.”

He adds that many are ignoring their long-term needs “very possibly ignorant of the fact that a few rather painless modifications would deliver huge returns down the line”.

The RRR22 is based on the Brand Atlas survey which tracks the lifestyles of the 15,4 million economically active South Africans (16 years or older, living in households with a monthly income of more than R6,000 pm, with access to the internet).  

The percentage of people executing a properly thought-through plan is still just 8%. 

“For a country without meaningful social security, this is terribly low,” says Van Heerden.

He noted that even if, for example, most Americans probably wouldn’t fare much better on this score they at least can look forward to a monthly social security cheque (of around $1,600 on average, i.e. more than R27,000 at the current exchange rate). South Africa’s old age grant is less than R2,000, for those poor enough to qualify. 

It is not simply a question of a lack of education: Van Heerden points to the fact that 91% of respondents in the survey claim a matric, or a post-matric qualification. 

“They have invested 12 to 20 years in their academic education, to support themselves as working adults; but, as working adults, they cannot muster the comparatively very small investment in financial education that it would take to make sensible, informed decisions about funding their retirement years, which may run for 20 years or more.”    

Van Heerden says the required body of knowledge on the subject is so small that even a modest investment of time and attention would deliver a huge payback.  

“It’s safe to say that no other endeavour would match the return on that time invested if those lessons were implemented from an early work age.” 

A significant challenge is to get young workers interested. South African average life expectancy (around 63 years, according to the latest Stats SA data) is not helpful, as it suggests that the odds of a lengthy retirement are low. But that measures life expectancy at birth, which is depressed by our high child mortality rate (at 3,2% still 10 times higher than in developed countries). But those who enter the workforce can expect to make it to their mid-Seventies, on average, and spend a good few years being retired.  

“Yet few bother because they don’t see the value, and they don’t see the value because they don’t bother. It is a catch-22 situation,” says Van Heerden.

But, as the RRR22 outlines in some detail, the remedy for many is a simple and quite painless one. Start saving early, save consistently, invest those savings in a well-diversified, low cost, high-equity fund and leave it there even when tempted to cash out and blow it when changing jobs.

“It won’t help those who cannot find work, or earn too little to save, but increased engagement with the topic and a disciplined savings and investing plan would help many, including those who are saving but have no idea at all about it (eg how much they are saving, or paying in fees) or where that savings plan will take them,” says Van Heerden. DM/BM

Tobie van Heerden, Chief Executive Officer of 10X Investments


The content herein is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice.  10X Investments is an authorised FSP (number 28250)


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