Retirement is usually the last thing on the mind of anyone under 35, but experts warn that this lack of forward planning may be to the financial detriment of the millennial generation.

The average age of retirement in South Africa is 60, but statistics from the latest 10X Retirement Reality Report indicate that only 6% of South African’s are on track for a decent retirement by that age.

“For years, financial planners and other financial institutions have tried to convince young people that they should be putting as much as 20% of their salary aside each month towards their retirement. Saving for retirement should start in your twenties,” explains Gus Van Der Spek, developer of upmarket retirement village Wytham Estate.

“Unfortunately, retirement may seem like an abstract concept at that age and COVID-19 has further exacerbated the situation,” he adds.

Why aren’t we looking ahead?

 A large portion of the country is barely making ends meet, with no income to put aside as savings.

While this is the primary contributor to the low percentage of South Africans on track for a decent retirement, there are other more subtle factors contributing to why those who can afford to invest in their future are choosing not to do so.

“We are living in a time of deep uncertainty – made even worse by the impact of the COVID-19 pandemic,” says Van Der Spek. “Many young people are struggling to plan even a year in advance given the current climate – let alone 40 years,”

“Unfortunately, aging is inevitable, and it is hugely important to have a plan in place when the time comes, especially if you want to spend your golden years in comfort.”

How much should one be putting aside?

 Van Der Spek says that while many financial planners advise on putting a specific percentage aside each month, how much one chooses to save should be informed by future lifestyle considerations rather than by a ‘one-size-fits-all’ approach.

“If we’re talking specifically about the costs of retirement accommodations or housing, there are a huge range of options available – and all at different price points. Before you start saving, it helps to have a realistic idea of the kind of lifestyle you expect to live once you retire, and what this will cost so that you can budget accordingly,” he shares.

For those wondering what the difference is between a Retirement Annuity (RA) and a Pension Fund, Van Der Spek says: “An RA is taken out by an individual whereas a pension fund is provided by an employer and is tied to your employment status.”

The general rule of thumb for a comfortable retirement is 15%. “15% of your salary should be put aside for your entire working career of around 40 years. for those wanting to retire in luxury,

20%-plus is advised. Also bear in mind that what R1 is worth now, will differ by the time that you retire,”

Van Der Spek shares advice given by financial planners saying, “multiply your needs by 300. Simply put, if you currently live on R50 000 per month, multiply this by 300 to determine what you will need to maintain a luxury lifestyle post the age of 60.”

Van Der Spek says that maintaining one’s lifestyle should be of the utmost importance in their golden years. “People are living longer so your retirement savings should be underpinned by the quality of life that you want during retirement,”

Easy retirement tips for millennials 

1. Time to take the first step. “Whether you are 20 or 30, it’s time to start saving towards retirement. Whether you are saving 15 to 20% or whatever you can, it’s important that you ”
2. Seek help: “Work with a financial planner to do the math. They can map out the journey, analyse what is needed and will help you to determine the amount needed to retire in style. They will also help to select the best, interest-bearing retirement plan or pension fund on the ”
3. Do your research: “Some companies, particularly large corporates do allocate portions of your total cost to company to salary towards a pension fund or retirement Find out from the HR team what this entails and stay informed by tracking its performance throughout.”
4. Focus on the end goal: “On the days where you feel that retirement savings would be better spent on a holiday, take some time to visualise your This will help to keep you on track – think short-term sacrifices for long-term gain.”
5. Increase your allocation: “As you receive salary increases at work, make sure to up your retirement savings accordingly. Even a little bit can go a long way,” he concludes.