Only 6% of South Africans are financially on track to retire with comfort, according to the latest Retirement Reality Report from 10X Investments, a financial service provider. The rest? Well, many may be working long past 65 – and not by choice.
The benchmark is simple, but sobering: to retire with a monthly income of R25 000 before tax, one needs to have saved around R7.5 million by age 63. That’s assuming a cautious 4% annual drawdown. Few are even close.
People start saving too late, or don’t save enough, BusinessTech reports 10x’s Andre Tuck as saying. ‘That’s the shortfall in plain terms.’ The result? Millions heading for a future where working into their 70s – even 80s – is becoming the norm.
And, according to the publication, Sanlam Corporate CEO Kanyisa Mkhize agrees. ‘People think they’ll retire at 60. But our research shows many may need to keep working for another 20 years just to maintain their lifestyle,’ she said.
And the gap between retirement dreams and financial reality isn’t just about savings – it’s about advice too. Sanlam’s latest benchmark study found nearly half of respondents rely on Google for financial guidance, while just 22% turn to financial advisors.
‘Without real advice, people are making life-changing money decisions in the dark,’ said Mkhize. ‘Most only start thinking seriously about retirement in the last five years before stopping work – and by then, it’s often too late.’
The Two-Pot System: A double-edged sword?
Adding to the strain is South Africa’s new Two-Pot Retirement System, which came into effect on 1 September 2024. It allows individuals to access a portion of their retirement savings early – a relief for many, but with consequences.
According to 10X, 36% of South Africans have already dipped into their pots. Some have taken out a portion; others cashed out everything.
‘That’s short-term relief at the cost of long-term security,’ warned Mkhize. ‘It’s like draining your dam during a drought, then hoping it rains tomorrow.’
In fact, almost half of those who switched jobs also cashed out their pensions entirely.
And SARS? They’ve noticed. Business Tech added that Commissioner Edward Kieswetter said the revenue service had expected R5 to 6 billion in tax income from two-pot withdrawals. But with over R43 billion already drawn by more than 2.4 million fund members, the real tax haul could be between R11 to 16 billion.
Kieswetter didn’t sugarcoat it: ‘It’s a troubling depletion of the national savings pool,’ he said during a webinar hosted by Allan Gray. ‘Short-term boosts in consumer spending don’t outweigh long-term damage.’
Cape {town} Etc reported last month that many members of retirement funds are making repeat withdrawals, depleting their savings components at an alarming rate, ultimately raising questions about the long-term viability of their retirement plans.
The bottom line?
South Africa is in the middle of a slow-moving retirement storm – and many are sailing straight into it with no compass, no lifeboat and no map.
For now, the message from experts is clear: get advice early, save consistently, and think twice before dipping into the pot too soon.
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Picture: Towfiqu Barbhuiya / Unsplash
