According to the United Nations Population Division, the average human life expectancy is projected to reach 77 years by 2050.
And while the age of 77 may not sound exceptionally old, it represents a significant increase from the 1950s – the decade in which many current retirees were born, when life expectancy was just 46 years. Countries like Japan and Switzerland have already surpassed the 2050 projection, with citizens living till their mid-80s on average.
“Longer life expectancy is great news and a testament to the advancements in medicine and quality of life enhancements over the last 50 years,” comments Gus van der Spek, owner of the upmarket retirement lifestyle development Wytham Estate. “However, this also impacts the financial planning strategies of current and future retirees, who are now more concerned about ensuring their retirement savings will last comfortably through their Golden Years.”
Younger South Africans are in denial about retirement costs
External market factors such as the high cost of living, inflation, and interest rates have compounded these feelings of financial insecurity. As a result, some older South Africans are choosing to remain in the workforce long after the commonly accepted retirement age of 65 to ensure they have sufficient funds to see them through their final years.
The latest 10X Investments Retirement Reality Report revealed that 17% of respondents aged 50-plus now believe they will retire only after 70, in stark contrast to just 5% of respondents aged 35-49 who held the same belief.
“This indicates a major generational disconnect in what it takes in terms of financial planning and savings to retire comfortably,” comments van der Spek. “More surprisingly, the same report revealed that nearly half of respondents had no retirement savings plan in place whatsoever.”
While these findings are sobering, South Africa’s economic challenges play a significant role, with 70% of respondents attributing their lack of retirement planning to having no money left for savings after covering monthly expenses. Even more concerning to van der Spek is the 20% of respondents who stated, ‘retirement is not a priority for me at this stage of my life.’
“The reality is that to retire comfortably, you have to start saving as early as your early twenties. Work with a financial planner to map out your retirement goals and determine what is needed to get you there, as they will also be able to assist you in choosing the most appropriate interest-bearing retirement annuity or pension fund on the market.”
How much will it take to maintain your current lifestyle?
He adds that while there is no ‘one-size-fits-all’ approach when determining how much is ‘enough’ to afford a comfortable retirement, the general rule of thumb is to put aside 15% of your salary every month spanning the average career period of about 40 years. “However, to afford a luxury retirement, putting aside 20% or more every month is strongly advised”.
“Another useful tool for calculating your retirement expenses is by multiplying what it currently costs to maintain your standard of living by 300. So, if you currently live on R60,000 a month, multiply this by 300 to determine what you will need to set aside to comfortably maintain your lifestyle once you retire and no longer receive a regular income.”
Maintaining the same standard of living post-retirement is of crucial importance to over 60% of those surveyed by the 10X Investments Retirement Reality Report – a sentiment van der Spek strongly agrees with.
“Your Golden Years shouldn’t be about making sacrifices – it’s a time to slow down and enjoy the fruits of your life-long labours without being burdened by day-to-day financial concerns. Strategic financial planning and choosing the right location for your retirement is key to achieving this.”
Busting ‘luxury’ retirement myths
Van der Spek shares that contrary to popular belief, ‘luxury’ retirement developments like Wytham Estate can prove to be more cost-effective in the long run than buying into a sectional title scheme or residing in a frail care facility.
“The majority of retirement developments or lifestyle villages have adopted the life rights ownership structure. Right off the bat, this can be more cost-effective for retirees because life rights eliminate upfront property transfer costs like transfer duties, VAT, legal fees and bond registration fees,” continues van der Spek.
“Life rights holders are far less likely to face hidden costs and special levies, as the developers are required to produce a transparent statement declaring how levies will be calculated, as well as a two-year projection of what levies will be. This is highly beneficial to residents who can budget ahead accordingly.”
He shares the further financial advantages of opting to live in an upmarket retirement development as follows:
- Reduced cost of living: Day-to-day costs are greatly reduced with services and staff that lower the expenses of individual homeownership. “This includes staff for communal garden upkeep, unit repairs, cleaning services by the hour, 24/7 security, and no obligation to pay for home insurance and maintenance, which are the developer’s responsibility ”
- Extensive on-site amenities: Luxury retirement developments offer amenities like swimming pools, exercise facilities, tennis and croquet courts and social activities at no extra cost, reducing transport expenses in the process.
- Healthcare on an as-needed basis: Many developments have an ‘age in place’ policy, integrating healthcare as needed. “This is more cost-effective than round-the-clock care in frail care facilities and prioritises primary care, helping to catch costly and potentially life-threatening issues ”
“Longer lifespans mean more time to enjoy what makes life worth living. Start planning for retirement as soon as possible and make financial sacrifices early in your career to ensure you spend your retirement in the style you deserve. Don’t compromise on comfort—you deserve to live your Golden Years in a place that makes you happy,” van der Spek concludes.