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Can the majority of South Africans ever afford to retire?

Economists say, unless you’re able to save 17 times your annual salary by the age of 60, you may never afford to retire.

stimulus package rand value

Image credit: Pixabay

The face of retirement is changing. Previously, the idea of retirement seemed affordable; a natural progression of life, whereby a productive member of society is allowed the opportunity to kick their feet up and enjoy their autumn years.

But that myth is fading, and fading very quickly. In fact, the idea of retirement – being able to retreat from the workplace at a certain age – is nothing more than a fallacy for the South African majority.

In reality, the scales of retirement have shifted to the elite. Regardless of age, it would seem that continuous work is the only guarantee for self-sustainability throughout the years.

Living hand to mouth

Even the South African middle-class has been hit by a change in protocol concerning pension funds afforded to employees by companies. What was previously considered somewhat of a right, has now become a luxury.

This leaves ordinary South African having to figure it all out themselves; to save and invest every single month for that time when they might be able to retire.

Statistics show that, for the majority of South Africans, long-term saving is particularly challenging. This makes sense when considering that more than half of the South African population lives in poverty.

Poverty, by definition, does not allow for the luxury of saving.

A report by Mail & Guardian in 2017 indicated that the right of retirement was slipping away from the middle-class. Investment firm, Allan Gray, revealed that 29% of middle-class South Africans were unable to retire.

Ask yourself this question: Will you be able to save 17 times your annual salary by the age of 60?

If you answered ‘yes’, then you may have a chance at retirement – provided you have no mortgage and no dependents.

If you answered ‘no’, chances are you’ll be relying on a state pension or the goodwill of relatives in your autumn years. Or, if in old age you have no physical disabilities, your best bet would be to carry on working.

The Older Person’s Grant – State pension

Luckily, the caring government of South Africa is not about to leave poor pensioners in the lurch. The South African Social Security Agency (SASSA) has allocated funds to each pensioner who:

  • Is a South African citizen / permanent resident
  • Is 60 years or older
  • Is not receiving payments from another social grant
  • Have a monthly income below a certain level

If you happen to tick all those boxes, you are afforded a monthly grant of R1,600.

While the former Minister of Social Development, Bathabile Dlamini, infamously remarked that ‘R753 per month is enough to buy adequate food as well as additional non-food items’, researchers have estimated the cost of essential food and non-food items needed to survive at R1,319 for a single person.

Old-age homes

Old age homes, retirement villages – call them what you like. The sad reality is that privately run facilities geared towards retirement are extremely expensive, afforded to only a small section of society.

There are, of course, less expensive facilities operating under local government administration – but these facilities are severely backlogged as the number of South Africa’s poor pensioners pile up.

There are also groups like Communicare, who ‘provide rental housing to a wide range of tenants including a large portfolio of social rentals (properties rented at discounted rates)’.

As is the case with many aspects of modern life – money talks. Pensioners who benefit from a social grant are often unable to find accommodation – leading to a growing number of homeless pensioners within South Africa.

Sustainable retirement options

The future of retirement looks grim for the majority of South Africans. The playing field has changed for Millenials and generation Z.

Simply, modern-day South Africa has become more affordable. Rising petrol prices and a steadily increasing VAT rate only add to an already uneasy local economy.

So what do you do, when you’re 60 and haven’t saved up enough money to retire?

If you can, you continue to work. A stable income, no matter how small, will provide some sort of financial sustainability.

If you’re unable to work, you apply for a government pension and rely on the kindness of your, hopefully, employed children.

Culturally, African communities have excelled in supporting their seniors – the reasoning being; parents provide children with the best possible opportunities in life, through hard work and building a strong social fabric, so that those same children may be in a position to shelter the elders in ’retirement’.

It’s a caring culture which has worked for generations, but an uncomfortably high unemployment rate threatens to disrupt this strategy.