Will you retire by the age of 65? Insurer suggests that may not be the case

Most South Africans will not be able to retire comfortably until much later than 65, possibly closer to 80. File photo.
Most South Africans will not be able to retire comfortably until much later than 65, possibly closer to 80. File photo.
Image: 123RF

While the official retirement age in SA remains 65, new research highlights a concerning reality for many South Africans.

According to Sanlam's Benchmark 2024 Insight Report, most South Africans will not be able to retire comfortably until much later, possibly closer to 80.

"Most employees surveyed indicated they anticipate retiring between age 56 and 60, while business owners indicated they are likely to continue working beyond age 65," said the report. 

The research also showed "26% of pensioners, mostly those who were self-employed prior to retirement and higher-income earners, continued to engage in some type of work beyond their official retirement".

Although 65 is the most popular retirement age in SA as it is often clearly defined in retirement fund rules and employment contracts, the report showed there's growing concern about the adequacy of the age in light of increasing life expectancy.

"More than half of funds (60%) and participating employers (66%) felt that, given the increase in life expectancy, their normal retirement age was not sufficient to allow members to build up enough retirement savings over their working lifetime to maintain their standard of living in retirement," said the report. 

While the reality of working longer to secure financial stability in old age is a concern, some employers argue that maintaining the retirement age is important for creating opportunities for younger individuals in the labour market.

The Sanlam report also sheds light on the broader financial struggles facing many South Africans, with almost 49% reporting being burdened by debt and unable to set aside much for retirement or medical benefits.

"The burden of financial insecurity not only strains an individual’s economic stability but also profoundly impacts his or her mental health, leading to a myriad of psychological challenges."

"More than 80% of respondents confirmed they were experiencing financial stress, which had an impact on their mental health," said the report. 

As South Africans struggle with mounting financial pressures, retirement planning continues to take a backseat. A substantial 59% of retirees sought the guidance of a professional financial adviser before retiring, with 54% continuing to rely on advisers in retirement.

The report also revealed many South Africans are failing to save enough for their future.

"The average South African is expected to achieve a 25% replacement ratio (the percentage of the final working salary they'll receive as retirement income) at the traditional retirement age of 65. This is significantly below the industry benchmark of 75% required for comfortable retirement," said the report. 

The report also showed  many individuals are far from meeting the benchmarks needed to maintain their standard of living in retirement.

"It is fairly damning that funds are not confident that more than 70% of their members will be able to maintain their standard of living in retirement," the report stated.

A worrying 66% of umbrella funds believe the retirement age is insufficient to build adequate savings, specially considering increases in life expectancy. Meanwhile, 32% feel the age is reasonable, but only if contribution rates are high enough.

The situation is compounded by the fact that many individuals are failing to preserve their retirement funds when changing jobs. In 2024, only 19% of people who accessed their funds upon resignation or retrenchment preserved any of their savings.

"The average South African is expected to achieve a 25% replacement ratio (the percentage of the final working salary they'll receive as retirement income) at the traditional retirement age of 65. This is significantly below the industry benchmark of 75% required for a comfortable retirement," said the report. 

Sanlam said this reflects the growing financial pressures consumers are facing.

"This provides the confirmation for the intention and importance of the two-pot system," the report emphasised.

The global debate surrounding retirement age is not unique to SA. 

"In 2023, protests took place in France against government plans to increase retirement age from 62 to 64 years," the report noted, drawing a parallel between global retirement age debates and SA’s challenges. 

TimesLIVE


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