Can you afford to retire in South Africa? Probably not.

Updated Nov. 25, 2024, 8:02 a.m. | By East Coast Breakfast / Skyye Ndlovu

South Africa’s savings culture is in a crisis, with 94% of people unable to retire comfortably.

Can you afford to retire in South Africa? Probably not. — Dilok Klaisataporn / iStock

Retirement - one of the main reasons we work so hard almost every day, because we have something to look forward to. Well - not really.

South Africa’s savings culture is in a crisis, with 94% of people unable to retire comfortably, mainly because we underestimate how much we actually need.

Investec Financial Advisor, Kgomotso Motloung, explained on the ‘Everything Counts’ podcast, that many people reach retirement only to discover they’ve saved far less money than they had anticipated.

For example, the R3 Million savings you’ve accumulated over your decades of service has to last you for about 20 years. This means your monthly income after retirement will be roughly R12,500 - which is far less than what you probably earned per month and may not even cover your monthly expenses.

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Kate Robson, co-head of Investec My Investments, shared that a general guideline is to save 20 times your annual salary, when considering the average retirement span to be 30 years.

Other factors to consider include where and how you plan to live after retirement. Kate encouraged South Africans to start retirement planning as early as possible, but also that it’s never too late to begin.

However, it’s not all bad news. Kgomotso explained how the replacement ratio might assist in making your retirement less expensive. This considers what portion of your current income you’ll need in retirement based on expected changes in lifestyle and expenses. For example, by the time you retire; your children will most likely be financially independent, and things like mortgage may be fully paid off.

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Regardless though, it raises a lot of concerns when you realize that your retirement may not be as comfortable.

So, maybe it’s time to start thinking about creating other streams of income that can help sustain you financially, on top of your retirement savings.