By: Bridget Nkandu
Many hardworking South Africans see retirement as the finish line. A time when you can finally relax after decades of employment.
Unfortunately, the financial reality for most people who reach this stage is very different from the dream. According to research done by Nedbank in 2023, a staggering 90% of South Africans have not saved enough to retire comfortably, which is not a situation any of us want to be in.
That is why it’s so important to keep saving for retirement right up to the day you can finally turn off the alarm clock. In fact, since you’re no longer earning a steady salary once you retire, it's a good idea to continue that saving habit right through your retirement years too – just to make sure your money keeps on working hard for you, even when you’re no longer working to earn it.
One of the main reasons why senior South Africans (55 and older) need to continue saving and make it even more of a priority, is that people today are living longer than ever before. Improved healthcare and better living conditions mean that most of us can expect to live well into our 80s and beyond. While longevity is something to celebrate, especially if you’re healthy enough to make the most of your golden years, your money needs to last longer.
Another reason ongoing savings are critical is inflation. Even if retirement brings an end to your working life, it doesn’t halt the rising costs of goods and services. Inflation erodes the value of money over time, meaning that the savings you have today will not cover as much 10 or 20 years into your retirement.
For seniors, this becomes especially relevant as healthcare costs, often the largest expense in later years, tend to rise faster than general inflation. Medical aid contributions, treatments, and related expenses can quickly consume a big portion of your retirement income. By continuing to save and invest in inflation-beating assets and solutions, seniors can protect themselves against the financial pressure of inflation.
Of course, unexpected expenses also don’t simply disappear once you retire. Life is unpredictable, and unplanned financial emergencies like home repairs, car and appliance breakdowns, sudden medical expenses, or even helping family members in need, can put pressure on your finances if you haven’t prepared for them. Without enough savings, emergencies can derail even the most well-thought-out financial plan. As a senior, having extra money set aside for these surprises is crucial.
Then there’s the issue of debt. This is one of the biggest challenges many people face, and it has the potential to be a significant burden on your retirement finances. With around 67% of most people’s monthly income being used to pay debt, many are left with limited disposable income.
This makes it even more critical to prioritise saving as you approach retirement. Rather than reducing contributions to retirement funds and savings accounts, it’s vital to work with a financial adviser to develop a plan that enables you to balance your debt repayments with the need to keep saving to ensure you can enter your retirement years in a financially secure and relatively debt-free position.
For all these reasons, if you’re a senior, your last few pre-retirement years should be the time to make that final push to maximise your savings. It’s not enough to simply set money aside; you need to make sure that your money is working as hard as possible for you, while also staying protected from the risk of market declines.
Safe, income-generating investment options like fixed deposits are key to balancing risk and return. Fixed-deposit accounts are also very useful for retirees. You can choose to have the interest from your investment capital paid out into your bank account, which is a great way to supplement your income in retirement.
Many people think that financial planning and committed saving are meant only for certain stages of life. However, getting older, or even retiring, should never mean the end of saving. In fact, saving is more important than ever at that time in your life. If you’re 55 or older, continuing to build and manage your savings is crucial for ensuring peace of mind and financial stability for all your years to come.
* Nkandu is an executive: segment strategy and new business development at Nedbank.
PERSONAL FINANCE