Discover six practical strategies to enhance your retirement savings, even in the face of rising living costs in South Africa. Learn how to start early, preserve your savings, and align your investments with your goals. File photo.
By Asavela Gwele
The economic reality in South Africa today leaves many middle-class households grappling with mounting expenses, dwindling disposable income, and a persistent inability to save for retirement. Insights from 10X Investments’ Retirement Reality Report underscore a troubling truth: a significant proportion of South Africans remain unprepared for retirement, and even those who have started saving, often feel that their efforts are falling short amid rising costs.
With the cost of necessities soaring, it’s little surprise that so many are struggling. Statistics South Africa reports that a basic food basket for a family of four costs R3,430 a month, a figure that leaves even dual-income households battling to make ends meet. These financial pressures make retirement savings seem like an unattainable luxury for many. Yet, this mindset can lead to long-term hardship. Retirement planning must become a non-negotiable priority, even during difficult times.
Smart strategies to ensure a secure retirement
While the challenges may seem overwhelming, there are practical strategies that individuals can adopt to improve their retirement outcomes.
1. Start early, even if you start small
Time is the single greatest asset when it comes to retirement planning. The earlier you begin saving, the more you can benefit from compound interest, which allows your money to grow exponentially over time. Even small, consistent contributions can make a significant difference.
2. Preserve your savings when changing jobs
When transitioning between jobs, it is essential to transfer your retirement savings into a preservation fund or retirement annuity. Cashing out these funds might offer short-term relief but severely diminishes your long-term financial security. Keeping your savings invested ensures that they continue to grow and accumulate returns.
3. Diversify your investments
A well-diversified portfolio is key to managing risk and maximising returns. By spreading your investments across various asset classes, you protect yourself against market volatility while ensuring steady growth. Diversification is especially important in uncertain economic times when single-asset strategies can become vulnerable.
4. Understand and minimise fees
Investment fees, if left unchecked, can erode a significant portion of your savings over time. It’s crucial to evaluate the fees charged by your retirement fund and to consider cost-effective options that maximise your returns.
5. Align your investments with your goals
Each individual has unique financial needs and risk tolerance. Speaking to a retirement specialist can help tailor your investment strategy to your specific objectives. A professional can ensure that your portfolio is appropriately aligned with your life stage and retirement aspirations.
6. Pay yourself first
One of the simplest yet most effective strategies is to save a portion of your income before spending on anything else. By treating your retirement savings as a non-negotiable expense, you can build a disciplined approach to investing that safeguards your future.
Plan for a longer life
Advances in medicine mean that many South Africans will spend decades in retirement. As a result, it’s critical to plan for a longer-than-expected retirement period. This involves setting realistic savings goals and considering higher drawdown rates in later years.
Bridging the gap
The expectation-reality gap in South Africa’s retirement landscape underscores the need for greater financial education. With better awareness of the principles of saving and investing, more individuals can take ownership of their financial futures.
Ultimately, preparing for retirement in a high-cost-of-living environment requires both discipline and informed decision-making. The good news is that tools, advice, and resources are readily available to help South Africans navigate these challenges. By taking proactive steps today, individuals can secure a retirement that aligns with their aspirations, no matter the economic pressures they face.
* Asavela Gwele is a senior consultant at10X Investments.
PERSONAL FINANCE