Retirement savings – Is your financial future a game of snakes and ladders?

‘How to climb the ladder to retirement’ visually illustrates the ‘smart and not so smart’ choices when it comes to retirement planning.

South Africa’s retirement savers are often unable to take the tough decisions necessary to improve their retirement outcomes, however – the challenges they face include a shortage of information with regards to their retirement funding, a lack of understanding of the limited information that they do have, and an inability to foresee the implications of the decisions they do make.

According to some of the initial findings of 2016 Sanlam BENCHMARK Survey, the level of retirement knowledge to empower saving decisions is dire, with “only 35.1% of the sample group surveyed believing that they have enough to survive on in terms of their savings for retirement”.

One of the most significant trends across the globe is the continuing increase in human longevity, largely due to ongoing improvements in nutrition, public health and medical technology. For working South Africans saving for their retirement, the impact can be dramatic – the fact that we are living longer than our predecessors means we need far more money for a much longer period of retirement. When it comes to retirement planning, making the right choices at the right time becomes an imperative.

Knowing the value of your retirement investment

Among the alarming findings from the 2016 survey is that one in five retirees only find out about the value of their accumulated savings upon retirement, and on average the retiree found out three years before retirement. This is far too late to make any meaningful intervention within the limitations of current retirement thinking.

Know your group scheme benefits

Many retirement fund members were also largely unaware of benefits they had through their employer – aside from medical aid benefits.  When prompted, many respondents then remembered they had death and disability cover through their employer, but had little idea of the extent or value of the cover.  Employees are also unaware of the possibility to convert group scheme benefits, such as life assurance, into individual benefits at retirement. This could be beneficial to retirees as typically no medical underwriting would be needed at the point of conversion, provided the benefit falls below a certain limt.

Seek professional retirement planning advice

Only 69% of retirees had received advice about retirement, and on average this was first received 9 years before their retirement date. The survey results show that a range of critical advice components were not remembered by savers.

Make informed decisions 

A few simple, informed decisions can have a big impact in terms of how well a retirement fund member can retire.  At the same time, an incorrect decision on contribution rates, investment portfolios, withdrawal of capital when exiting a fund due to retrenchment or resignation, or type of annuity can have dire consequences on retirement outcomes.

Are you winning the game when it comes to retirement planning?