“While this result shows that efforts by the retirement industry to educate the public are starting to have an impact, it means that 40% of respondents don’t set goals, which is still far too high,” says Bjorn Ladewig, Head of Business Development and Marketing at Just SA. “Setting goals is a fundamental tool in retirement planning as it helps you understand what income you’ll need in retirement and whether or not your current financial actions support this.”

First conducted in 2015, the aim of the tracking study is to understand the needs of the South African retirement market. This year, there were 395 respondents made up of pre-retirees and retirees from 50 to 85 years of age. Target quotas were specified for geographic area, race, sex, age and monthly household income bands.

When analysing the results, three prominent retirement themes emerged: self-confidence, retirement confidence and contextual confidence. 

Self-confidence

This theme pertains to respondents’ attitudes about their preparation skills and abilities when it comes to retirement planning.  “When people feel they don’t know how to go about something, they often ignore it, which can have disastrous consequences,” Ladewig says. So while most people claim to do retirement calculations, this year’s study found a significant jump in respondents who admitted they don’t know how to plan for retirement: up to 54% from 28% in 2022.  

“While concerning, this is also a healthier outcome as an unwarranted sense of certainty can lead to poor decision-making or an overestimation of financial resources.” 

These findings highlight the importance of obtaining expert financial advice; however, only 30% of respondents say that they do.

Retirement confidence

While you might have confidence in your investments and your financial situation, how confident are you that you have enough money to last throughout your retirement?  Have you saved enough to cover your monthly expenses if you live to 100?  

“This confidence indicator is quite a bit higher this year compared to previous years, which could indicate that people have recovered somewhat from the adverse economic effects of the COVID years, and now have plans in place to ensure they have a sustainable retirement income,” says Ladewig.

Given the inflation roller coaster that has impacted personal finances since the end of 2019, it’s not surprising that respondents this year are more focused on financial security than financial flexibility. They want to know that their retirement income will last throughout their lifetime, that it won’t vary significantly due to market volatility, and that it will at least keep pace with inflation. In fact, 84% said it is important for retirement income to keep up with inflation.

“Retirement confidence is not just for the financially savvy: it is essential, no matter the size of your savings or the complexity of your financial situation. It is crucial for peace of mind during retirement.”

A point worth noting is that a high percentage of respondents said they planned to use some of their retirement savings to pay off debt.  “Given the fact that most haven’t saved enough to generate a sustainable income for life, having to use savings to pay off debt is disquieting.”

Contextual confidence

How do circumstances dictate confidence levels?  The study found that the economic and political environment weighs on retirees, yet many are opting for retirement solutions backed by bonds, with no inflation protection.

It also found that respondents tended to project their current sense of good health into the future, particularly mental health, and that only three in ten respondents have thought extensively about planning for cognitive decline due to Alzheimer’s or Dementia.

On average respondents think that they will live to approximately age 85, which is in line with current longevity statistics.  However, looking at the longevity estimates of different age bands in the study, it is evident that individuals don’t accurately estimate their own life expectancies. “Retirees should be careful not to underestimate their lifespan, and have a financial plan that spans about 30 years in retirement.”

What retirees need to achieve a sustainable income for life is to secure a diversified balance of guarantees, inflation protection and growth.  While traditionally they have only had two main choices for generating their retirement income – a life annuity or a living annuity – there are blended annuities that offer the benefits of both.  

“Having a dependable income for life is a crucial retirement goal. Knowing how much income you’ll need for the duration of your retirement far in advance will enable you to take more informed steps now to ensure you get there” Ladewig concludes.