The importance of saving specifically for retirement is something the vast majority of South Africans underestimate, and there are terrible reasons to not save for retirement. Here are some of the worst:
1. I don’t plan to retire
I’m afraid that in most cases, it’s not your decision. Before you make up your mind on this, speak to a few retired people. You may find that very few of them really chose to retire. Most were forced out of their companies at retirement age. For some, either their own or their spouse’s health failed, forcing them to put down their tools sooner than expected. Everyone retires. Only those who plan to retire, do so with dignity. Even if you can easily earn an income after formal employment, don’t you want the freedom to choose what to do with your time in your 60s and 70s? If I choose to do something that earns an income, that’s a bonus for me. If I choose not to, I’ll be incredibly grateful that I made the plans necessary to allow me those options. I expect you will too.
2. I’ll start saving later
Most people I’ve encountered with this reason are missing some crucial perspective that would put them off this plan.
If you start saving at 20 at a rate of 14% of your salary, say, you should be able to save enough to replace 75% of your salary at retirement.
If you wait 10 years to start saving at age 30, you’ll then need to save 22% of your salary.
If you only start saving for retirement at age 40, you will need to save 38% of your salary.
In other words, if you start saving as early as 20, by the time you get to 40, you will still only need to save 14%, instead of at 38%. That’s 24% more of your income to spend rather than save.
Delaying saving can mean you’ll have to drastically cut your standard of living just when pressure on things like school fees and home loans may be the greatest. What it usually means is that you simply won’t save enough for a comfortable retirement.
3. I don’t trust that my money is safe
Check my previous post on this point. As long as your retirement provider is reputable, saving in a company pension or provident fund is one of the safest things you can do with your money. And because you can tuck these savings away before the tax man takes his cut, it’s also one of the most efficient things you can do with your money.
If you aren’t sure how to start saving correctly or you not sure if you are saving the right way, chat to your expert team and let us help guide you on the correct path.
