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The relocation and (semi) retirement revolution

Average life expectancy is approaching 89 with the quality of life increasing. Are you prepared for the financial consequences of living longer?

With healthy living driven by fashion, consumer awareness and trends caused by medical aid schemes and where changes in behaviour are rewarded by loyalty programmes, it is no wonder that life expectancy is edging ever upwards. They say that the person who will live to 150 years old has already been born.

The medical advances due to technology are staggering and are unlocking longevity with one corollary: can you afford the surgery or rehabilitative programmes that can provide quality of life?

Affording quality of life

Affordability is tied to savings and retirement provisions and the statistics do not make for happy reading. “Sadly, this is but a pipedream for most South Africans, with only around 6% to 8% of the country’s population able to retire comfortably (with a replacement threshold of around 60% to 70%),” states Wikipedia.

The R and (S) R Conundrum

This means most South Africans will have to supplement income for between 20 to 30 years due to increasing life expectancy, as for many people reaching ages 60-65 no longer means retiring in the traditional sense.

The grim reality is savings and retirement income will run out as lifespans increase by 20 to 30 years, even if you continue to work or be semi-retired. Before I propose a solution, let’s evaluate purchasing power determined by a soft currency environment.

The Rule of 72

This rule calculates in how many years income halves in terms of purchasing power. Or in how many years the price of say bread doubles at an inflation rate of 6%.

If inflation is 6% then, using a loaf of government bread as the example priced at R16.50, then in 12 years’ time (72/6) that same loaf of bread will cost R33 and in 24 years cost R66. Are you scared? You should be, because in your autumn years your income-earning ability will decline and you will not be able to keep up with inflation.

The story does not end there….

As a country like South Africa loses its intellectual capacity to manufacture locally or grow food because of politically-motivated policy as opposed to economic logic, so we are forced to consume more and more imported goods and services. The result: the rand will continue its 40-year decline as measured against the US dollar. Going back to bread, the imported component is fuel. The entire supply chain from planting a seed to picking up the loaf of bread at the local retailer uses fuel … which is imported.

So, the inflation rate is not 6% but 6% plus rand depreciation. Over 40 years an average of plus 7% pa. Let us be conservative, 6% inflation plus 5% depreciation the total is 11%.

Rule of 72 = 72/11 = 6.55 years.

Using income to demonstrate, R50 000 p/m halves in purchasing power in 6.55 years to R25 000; 6.55 years later to R12 500; and 6.55 years later R6 250. At 60 years old you could enjoy R50 000 of goodies. At 60 + 6.55+ 6.55 +6.55 = 79.50 years old. This means you have to live on R6 250 p/m. Even if you are working you will not be able to maintain your current lifestyle.

Maintaining lifestyle

Ideally, you would like to live on passive income in your autumn years. To succeed in this goal, you need passive income to be inflation-linked and to be in a hard currency. Then if at 60 to 65 you need to supplement the income you will be able to keep up.

The R & (S) R Revolution

The relocation and semi-retirement revolution gives:

  • New life choices (where will you spend the next 20 to 30 years?); and
  • New Fourth Industrial Revolution career choices and opportunities.

The checklist for the R and (S) R Revolution not only includes hard currency-earning ability and passive income but also safety and security, a stable economic environment, quality and affordable healthcare and fair taxes in exchange for quality infrastructure and social services.

For the next 20 to 30 years you have the choice to relocate to a safe and first-world environment with affordable and good quality healthcare, hard currency-earning capacity and reasonable taxes. Is this Nirvana possible? Most definitely.


Costas Souris

Quality Group SA

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