How to start saving for retirement at 45

It’s preferable to start saving when you’re in your 20s, but the ‘better late than never’ maxim holds true.
Make a start, that’s the important thing. Picture: Shutterstock

It’s well known that South Africans are poor savers in comparison to other countries, to the point that it appears baked into our culture. Statistics show that 40% of working households have no savings at all, which means they will become dependants of the state welfare or family when they retire.

If you’re around 45 and all this sounds familiar, there is still hope. You may be halfway through your working life, but it’s not too late to make a start now.

Clarence Botha, investment consultant and actuary with Liberty, recommends a few simple steps to get started.

Firstly, make a start – even if it is just a few hundred rands a month. A lot of people are put off by dire warnings of the huge sum of money they will need to live comfortably in retirement, so they don’t even bother.

“Don’t be daunted by large targets. These become achievable soon,” says Botha. “If you can’t afford a large amount immediately, start small and have a plan for the future. And increase this every year.”

The next thing to do is see where money can be diverted from for saving, such as money that previously went to the mortgage bond or kids’ education. Start putting this towards savings.

A huge amount of damage is done when employees change jobs and start digging into their pension funds to satisfy some immediate financial needs, such as a home extension or a holiday. This is a big no-no. “Always preserve your retirement savings when you change jobs, even if the amount doesn’t seem like very much,” says Botha. “The benefit is twofold: first you increase your money available for retirement, and secondly, you preserve your tax benefits on that money.”

Most South Africans fail to save for a variety of reasons, some due to the pressure of having to support children as well as aging parents. Yes, many people struggle to make ends meet as inflation eats into disposable income, but these are all convenient excuses for not saving. Brian Tracy’s The Science of Money points out that most people are trapped into believing that their income is limited by what they are currently earning. Increasing income is one of the easiest things to do, but requires a change in mindset. Millions of people today earn extra income by running online businesses or by making and selling things outside of their jobs.

The next point to consider is tax. “Tax is very important and will depend on your specific financial situation,” says Botha. “Make sure you use all the tax benefits available to you. Remember, there is a cap on tax-deductible contributions to retirement savings now. That doesn’t mean you lose the option of adding more; it means you only get that benefit when you retire, rather than immediately. Other tax-efficient investments could include a tax-free savings account or life insurance company endowment policies.”

Now we get the subject of where to put the savings. Statistics from the South African Reserve Bank show that 16 million South Africans have savings accounts, but that 40% of this money is sitting in accounts earning little or no interest.

Botha suggests investing for growth and ignoring short-term fluctuations. At age 45, one should look at an investment horizon of 20 to 40 years. Markets will rise and fall during that period, so avoid switching funds to chase the latest winner.

“Over the long term it really pays to keep your eye on the prize and not make short-term knee-jerk decisions regarding your retirement money,” says Botha. “If you need certainty about your income in retirement, there are products that can give you at least a portion of certainty about how much you’ll get when you retire.”

Your time horizon is longer than you think. Even when you are approaching retirement, you need to plan for a good two or three decades after that. Many retirees prefer to keep on working, using their hard-earned skills to consult or even start new businesses. This is a smart way of thinking.

Another piece of advice: don’t cheat. What seems to be small amounts or percentages now will have massive impacts on your income and the duration you can afford to live comfortably later. The power of compound growth works in your favour when you are planning 20 or 30 years into the future. That R100 put into savings today adds up to a tidy sum in 30 years.

Once you have the savings part of the equation sorted out, be careful not to draw down excessively when you retire. Some people draw down more than 12% of their retirement savings in a year. Add annual product costs of 2% and inflation of 6%, and that means 20% of their savings is whittled away in a single year. This is not sustainable. Plan your retirement for the long-term and don’t binge in the first few years. Preserve your capital as much as possible and plan for a long life.

How much is enough? Although the following isn’t always advisable given each individual’s unique circumstances, as a quick back-of-the-envelope calculation, take the expected monthly withdrawals you will need at retirement and multiply that by 350. In short, you would need to have about R350 invested for every R1 of income you will require in retirement.

Brought to you by Liberty.


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There is no such thing as “convenient excuses” for not saving. I’m forced to be the carer of my elderly mother in all aspects. I dare you to be in my position of also nearly retirement age and I’ll never be able to retire, no matter whatever health issues. It’s not that we don’t want to safe – it has become IMPOSSIBLE. When was the last time you have actually visit a shop to only buy the monthly groceries, no luxuries – meat, only basic, basic groceries to survive until the next month. I’m in possession of receipts of the last 10 years – Zuma/Gupta era. Now we’re experiencing the Ramaphosa era and our weekly basket as of March 2018 had jumped by R120,00 per week for basic necessities no thanks to the hike in VAT, Eskom electricity, fuel, etc. If it wasn’t for the greed and corruption of the ANC Government there would’ve been enough funds to pay a SASSA pensioner at least R5000,00 p.m. which will ease the burden on children. All SASSA pensioners had paid their dues during their work life but try and explain that to the corrupt ANC Government.

Were you saving 10 years ago? Do you have DSTV Premium?

Christina – you last sentence is confusing – what dues did SASSA pensioners pay. Without being insensitive (I don’t know the full circumstances)did any of these struggling pensioners ever consider making additional payments to boost their pensions, people need to take charge of their financial futures. There are more cell phones in SA than there are citizens, yet we have an unemployment rate of some 40% (depending on who provides the statistics) – how do these people support their phone purchases and airtime?

“20 to 40 year horison..”
Lets say 30 which means age 75.
What a load of tripe.

Not a bad rate they’re advising – 350x monthly, that’s circa 29x annual or a 3.4% withdrawal rate, looks legit.

The reality is that the ANC has made South Africa an extremely poor country.

98% of people in South Africa will never be able to retire independently (as in retire without depending on family/friend financial support) and that is just the current scenario. It is going to get worse!

The ANC has never known how to govern. That is the sad reality of our country. They have followed popular politics with ignorant supporters who have kept them in power to line their pockets and neglect their duties all at the entire population’s expense.

The country is currently in an unrecoverable state with loans from other countries such a China and we are holding out our begging bowls to Saudi Arabia and the UK and Europe (the irony!) and bowing to the US begging for them to trade with us.

In a few years we will be signing IMF loans and the game will be over.

South Africa is on the way down and will hit rock bottom. But that will only happen in around 10 years’ time.

End of comments.



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