By Nico Strydom
The Covid-19 pandemic has made a considerable dent in discretionary and retirement savings for some and especially those who have lost a portion of or even their entire income and therefore had no alternative but to gain access to their savings.
“If you have been compelled to use some of your retirement savings, now is the time to evaluate how you are going to compensate for the deficit,” says Anil Thakersee, head of marketing and business development at PPS Investments. “The first step is to once again build up savings and this is feasible with the aid of a financial advisor.”
A TransUnion survey found that, due to a loss of income, people have withdrawn their retirement savings or suspended their contributions. Another survey found that many people have withdrawn money from their savings or emergency funds to cover expenses and that they are concerned that the pandemic will have a harmful impact on their retirement savings and retirement plans.
Even before the pandemic many South Africans were struggling to save enough for their retirement. “Thousands of employees had no other choice but to interrupt or decrease their retirement contributions or to collect their savings on retrenchment in order to survive the financial destruction of the long-lasting pandemic,” says Derek Pillay, chief consultant for retirement funding at Aon South Africa. “When they resume their contributions, usually it is against a lower interest rate due to decreased income and competing financial priorities.”
Thakersee also draws attention to research that found that only 6% of South Africans can retire comfortably and that after retirement many people have to continue working or depend on family or a state pension. “If you intend living comfortably after retirement, you have to take into account the time you have at your disposal to make it a reality, and also consider starting to save proactively as early as possible.”
People also live longer and it isn’t necessarily sufficient to plan for a retirement of 30 years. According to Thakersee, data of PPS members indicates that the average professional male will live up to 95 years and the average professional female up to 100 years and should therefore make provision now for a retirement of 40 years.
“Financial security during retirement is also necessary. It is advisable to project what your spending habits will be after retirement, as it will help you to determine the size of your retirement portfolio. As soon as you set a goal, you have options to increase your savings through investment products, by diversifying your portfolio, or by choosing the type of risk you want to take.”
PPS Investments: https://www.pps.co.za/
Aon SA: https://aon.co.za/