Many young South Africans avoid the conversation of retirement, some even characterised it as “boring”.

This can be attested by the “Liberty retirement planning survey” conducted in April 2022, which found that many South Africans only started to think of Retirement at the age of 40.

Another study conducted by “10X Retirement Reality Report”, stated that’s “Roughly two-thirds of adults are either not saving at all for this purpose or their retirement plan is vague.

Musa Nxumalo from Imbewu financial services said there were important factors that one needed to think about when planning to take a retirement.

Nxumalo said the most important question that one needed to reflect on prior taking a retirement was to think about was at what age would they like to retire.

He said there were several factors that needs to be avoided when one was looking for a financial freedom in retirement.

“Making use of the withdrawal option that comes with the upcoming new Two pot system regulation and making withdrawals from your retirement funds when you are moving from one job to another. Let’s dive more into the new hot topic,” Nxumalo said.

What is the Two pot retirement system?

As of September 1, 2024 all new contributions towards a pension or provident fund and retirement annuity will be split into two components. One third of the contributions will be allocated to the “savings component” which individuals can access annually subjected to a maximum of R30 000 and a minimum of R2 000.

Nxumalo further explained that of the remaining two-thirds would be allocated to the retirement component which individuals can only use to purchase a living or guaranteed annuity at retirement.

“Already 94% of South Africans are not on track to retire comfortably, according to the Association of Savings of South Africa (ASISA) it is estimated that only 6% of the South African population are on track to retire comfortably.

“Talk about disadvantages of utilising the withdrawal options before retirement? High tax implications, contributing to a shortfall in your retirement savings. Two-pot – will be taxed according to the members marginal tax rate and normal withdrawal on resignation, dismissal to be taxed on the SARS withdrawal tax table”.

On the question of how one can plan their retirement in the current tough economy, he said it was advisable to start as early as your second salary around age 20/21 to contribute towards your retirement plan, adding that one’s first salary was to thank themselves.

Nxumalo explained that starting your contribution at that early stages would give you an advantage of being able to invest in more risky portfolios, also taking advantage of compound interest that would give you greater investment growth.

“Take advantage of tax benefits attached to retirement savings and medical aid contribution. Also, looking into tax-free investments. Just start, it does not matter how small, just start.

A budget is key to helping you understand your finances. Analyse all your costs and expenses, what is worth keeping and what is not of value. Start looking for opportunities that will bring you residual income”.

Furthermore, he urged people to Invest in bonds and discretionary investments, and properties for rental income.

Nxumalo said the world was changing, and people should invest in skills that would make them relevant in the new world.

“Financial planning isn’t just about preparing for retirement; it’s about adapting to a continuously changing world. (henceforward - Retirement Planning 2024). Get a financial planner to help you plan and keep you accountable to the retirement plan.

The key factors into retirement planning are time, knowledge and innovation.

The world is continuously changing and the people that will have a comfortable retirement life are those that are continuously learning, developing and engaging in innovative methods of living.

The sooner you start to tackle your retirement plan the better your retirement days will be,” he concluded.

Saturday Star

sipho.jack@inl.co.za

Sipho Jack

Plan your retirement early: 94% of South Africans will not be able to retire comfortably