How to take control of your retirement savings

Some of us count the days until the end of the “nine-to-five”, picturing a retirement of beach walks, travel, quality time with loved ones, and the chance to finally pursue long-neglected passions. Others can’t afford to stop working at all. It’s easy to assume the difference lies in income or privilege, but more often it comes down to decades of financial planning — or the lack of it. 

There’s nothing more sobering than speaking to a 60-year-old whose retirement fund totals just R100,000. What do you say to someone facing the end of a working life with no safety net?

It’s easy to blame the investment industry for high fees, too many choices, or underperforming portfolios, although the answer is closer to home: It’s on us. We need to take a more active role in what’s in our retirement fund.

The 10X Investments Retirement Reality Report found that only 6% of South Africa’s population is on track to retire comfortably, highlighting a significant retirement savings crisis, with most people facing financial difficulty in their “golden years”. Of those who do plan for retirement, few are confident they can support themselves due to tough economic conditions.

The report shows that a typical earner who saves 15% of their income from the start of their career and preserves their savings when changing jobs will need about 40 years to accumulate a large enough nest egg for a comfortable 30-year retirement, presuming a return of 5% after costs. 

Experts suggest aiming to replace 60-75% of your working income in retirement. So if you earn R40,000 per month today, you’d want R24,000 to R30,000 per month in tomorrow’s money, keeping in mind that these amounts need to grow with inflation over time.

1. Take ownership and re-evaluate your investment strategy

Too often, people outsource responsibility for their retirement savings, assuming their employer’s fund will take care of everything. But simply belonging to a provident fund isn’t enough – you need to understand how it works, what you're invested in, and whether it's aligned with your goals. 

When was the last time you checked your balance? Are your funds positioned for the stage of life you’re in?

Confidence in your retirement plan doesn’t come from having a fund; it comes from knowing it’s the right one for you. Confidence in your retirement plan comes from staying informed and making intentional decisions, not hoping passively.

2. Dipping into your savings, or cashing in

About 56% of working people who change jobs cash in their retirement savings. When you switch jobs, it’s essential to understand the potential impact on your pension. Your new employer may have different pension policies, contribution rates, and benefit structures. 

Transferring your pension can consolidate your funds and streamline your retirement savings. However, it’s crucial to assess the fees, investment options, and any potential loss of benefits associated with the transfer.

One of the biggest downsides is the loss of compound growth: by withdrawing your pension early, you miss out on decades of investment returns. Even a small withdrawal can have a major impact over time.

3. Too much debt

Not prioritising debt repayments while employed leads to a debt burden at retirement, making it more difficult to cover basic expenses. Many retirees also have large mortgages or remortgage their homes to access funds.

Consider also making regular top-up payments towards your car or other debts if there is space in your budget while ensuring you provide for saving when you will need it most, at retirement. 

Paying off short-term debt and saving for retirement are two examples of financial levers that are within the individual’s control. Small, significant improvements in these areas will help you make large steps towards financial health and wealth.

The key message is: don’t panic. A limited retirement fund does not have to mean a life of struggle. You can still make the most of your golden years. The best time to start is now.

* Jackson is a client relationship manager, at 10X Investments.

PERSONAL FINANCE