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South Africans continue to work in retirement

Nine of every 10 retirees included in Old Mutual’s survey are working to supplement retirement income.

The 2019 Old Mutual Savings Monitor shows that many South Africans continue to earn some kind of income after they retire. It found that for every R100 these retirees receive, more than half (R56) is derived from post-retirement earnings.

The monthly contribution from a pension or retirement savings for nearly 80% of retirees makes up only 27% of their income, with other investments or savings contributing only 7%.

Read: How should you invest after retirement?

Retirees included in the survey were from a sample that had retired formally with income of R15 000 or more each month.

Two conclusions can be drawn from the fact that they have chosen to continue working past retirement age:

  1. They had not saved enough for retirement;
  2. They had underestimated the income they would be getting in retirement as well as their expenses.

This worrying trend ties in with the 10X South African Retirement Reality Report, where less than 50% of respondents were aware of how much money they could expect in retirement.

Skill sets dictate jobs in retirement

Lynette Nicholson, research manager at Old Mutual, says the types of jobs vary between industries and depend on skill sets. “For example, retired teachers may now be offering tuition classes for students while more creative types are turning their hobbies into an income source by venturing into fields such as furniture refurbishment.

“Those with accounting or book-keeping skills are likely to offer their services to smaller businesses such as hairdressers or beauty salons.”

Nicholson says the survey results show that half of retirees are working for an employer, 36% have started a business post-retirement, and 13% have continued to be self-employed or taken up positions as consultants.

Christo Botes, executive director of Business Partners, says many of those entering retirement are still in their prime and remain both physically and mentally fit, and capable of participating in business many years into their retirement.

“Not only are recent retirees able to remain active, but they are also equipped with a wealth of knowledge and experience that can be beneficial for a new business venture.” 

Botes adds that there are a numerous benefits for those starting their entrepreneurial journey in their late 50s to late 60s. “Older entrepreneurs have the advantage of the experience of managing teams successfully, stronger business networks, and are better skilled to execute business plans, all of which aid in running a successful business.

“A senior entrepreneur may also be more financially secure than younger entrepreneurs and have an alternative source of income, such as non-retirement savings that have been accumulated during their working life. This financial security can make the financial risks of starting a business less salient,” he says.

Sandwich generation

Fifty-three percent of retirees are still supporting dependent children and grandchildren, and of those, 41% are supporting dependents under the age of 12. In an attempt to cope financially, these retirees are cutting down on their expenses by spending less on clothing and shoes (45%), holiday and travel (41%), eating out and entertainment (39%), electricity and water (38%), entertaining at home (37%) and cellphone airtime (36%).

Nearly two-thirds of their income is directed toward living expenses, with 14% going to savings and 10% towards insurance and medical costs.

Most retiree households – 83% – have an emergency fund of some sort. Nearly 80% hold this in a bank savings account, with 35% having these funds unbanked or in cash. Nicholson says most surprising of all is that 14% admit to having a stash of cash that their spouse or partner is not aware of.

Why South Africans are so unprepared for retirement

Steven Nathan, chief executive officer of 10X, says it all goes back to a lack of planning, where as many as 45% of respondents began planning for retirement only after becoming established with partners or having children, while just 22% began planning at the beginning of their careers.

While the impact of saving early cannot be overemphasised, this is compounded by poor decision-making at the time of retirement. Nicholson says only 4% of respondents make the recommended choice to leave their pension or provident fund lump sum intact and opt to receive a monthly pension.

“The 21% of respondents who took the entirety of their pension in a lump sum are potentially worst prepared for the future,” she says, adding that 75% took a portion as a lump sum and the rest as a monthly pension, leaving them in a slightly better position.

By the time a person reaches retirement, they should have reduced or cut out all debt – but as many as 49% of the retirees surveyed still use a credit card, 51% a store card and 23% still had vehicle finance agreements that needed to be paid.

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“They had underestimated the income they would be getting in retirement as well as their expenses.” it should be overestimated the income and underestimated the expenses.

Not necessarily. 20-30 years ago some insurance agent sold them some policies with “illustrative” growth, which turned out way over the real growth.

Indeed, illustrated growth at 12 % alternatively 15 % compound per annum. They should be shot.

Corruption not just steals the future’s of the young, it steals the current economy from the aged.

I know a couple, both retired. Husband worked for a SOE, wife for a provincial department. Both reached reasonably high position but they were “offered” early retirement (both were told that if they retire they get a full pension, if they don’t they will not be promoted ever again and will make their life miserable). After retiring they kept on working as consultants earning more than their salary before, because the AA person who got the job turned out totally useless.

They had underestimated the ravages of normal inflation before the ravages of ANC corruption kicked in.

It’s not that you’ve not planned. The calculations done by actuary all those years ago didn’t take into account the ANC and corruption. If it had, we the middle income earner would’ve been in a position to pay the monthly instalments for these annuities. The middle income earner is cracking and barely surviving from month to month. Whatever you do to provide for old age, you’ll not be in a position to retire as the middle income earner is fighting a losing battle. It’s no wonder that those who can is leaving corrupt S.A in droves.

A 3de conclusion should have been drawn for people working past retirement.

3.) We live in a country where anybody that has anything will be taxed to death to support a failed regime. You will never have enough money to retire in peace they will come after it and bleed you dry. They have no ability whatsoever to do anything else. Just a bunch of long retired freedom fighters.

The models these guy’s run are applicable to the first world or Lala Land.

Exactly. The corrupt ANC destruction of the value of money by theft corruption and abuse and socialist policies is main reason. Article misleading. Nothing to do with the retirees.Typical advisor garbage.

There are primarily 2 destroyers of wealth for retirees:- 1) commuting a portion (normally a third)of ones pension on retirement. If you are luck enough to get an increase on your pension occasionally then you are throwing away that percentage on the commuted amount. 2) taking out retirement products with insurance companies – the wealth will be destroyed by by their fees.

Some describe him as the founder of modern macroeconomics. John Maynard Keynes also provided the reason why, for most people, it is statistically impossible to keep their standard of living in retirement.

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.” – JM Keynes.

This comment by Keynes boils down to this- Either governments will be able to service record levels of debt, or retirees will be able to retain their standard of living. Reserve Bank action puts the odds in favour of governments.

I remember so well speaking to two gentlemen in Australia a few years ago when they extended retirement age to 70. They were so happy as they were now able to continue working and keeping themselves busy. What are we going to do at home after 65 was there words!
Perhaps we should rather look at working longer than shorter and then moaning about it!!

Retirement is an entirely artificial construct. And has become the boogy man to be used by the retirement INDUSTRY. One should work as long as you want and forget about retiring. I am not worried about outliving my money, how long I live will be decided by me.

For sure. Evan super-wealthy industry moguls that can easily afford to retire (Bill Gates, Jeff Bezos, the Patrice Motsepes, the Johan Ruperts,…cough..the Christo Wieses..) many of them CHOOSE TO keep on “working”.

OK, they’re not economically active for the reason “to survive”…but mostly for a sense of self-worth.

Corruption not just ste@ls the future’s of the young, it steals the current economy from the aged.

Corruption not just ste@ls the future’s of the young, it ste@ls the current economy from the aged

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