The statistic that only 6% of South Africans can retire comfortably is often quoted in the media – usually in the context of how dismally we fare when it comes to saving for retirement. While we are a nation of poor savers, the good news is that there is always an opportunity to change the outcome. The catch, however, is that you must make a start and you’ll need to stick to the plan.
The scenarios you are presented with during a financial needs’ analysis are based on a few key assumptions and typically take inflation into account. These assumptions, and the fact that the results compound over time, can cause the numbers you are presented with to escalate exponentially.
If you have fallen behind on your retirement targets (and even if you have not), your initial reaction to the 6% figure may be emotional, rather than rational. Let’s assume you’ve been advised to accumulate R12 million in capital (your own numbers will depend on your specific circumstances).
“What do you mean I need to have saved R12 million by the time I retire? How is that even humanly possible?” you may ask. Numbers like these may seem overwhelming, especially compared to the numbers on our payslips and in our bank accounts. The enormity of the implications of what saving for retirement entails may lead us to feel we are doomed from the start, and as a result, many people give up before they even begin.
Focus on what you can control
Your emotional response to the numbers in your retirement calculation can paralyse you and prevent you from taking action. Giving up before you start is a sure way never to achieve your goal. Instead, understand the trade-offs you are making today, and know what is within your control and what is not. Maybe you can work longer than you initially thought, in return for saving a bit less. Maybe you can delay buying a new car by another year or two. Maybe you will only save R10 million and have to cut back on your lifestyle a little.