It’s the time of year again where South Africans nationwide swap work check lists for personal wish lists and the search for gifts becomes all-consuming. The festive season also presents a timely opportunity for pre-retirees and retirees to consider a more pragmatic approach to gift giving; namely to identify which gifts will give their children a smoother path in the years ahead.
The gift of a financial legacy for loved ones has long been a priority for South African retirees when considering their retirement income options - the idea of leaving some financial support to their heirs after death. According to retirement income specialist Just, this is still the case. In their 2019 Retirement Insights study, 80% of pre-retirees and retirees have a desire to leave money for their children and grandchildren.
However, the bleak reality is that many South African retirees simply have not saved enough to allow for a secure, regular income to last their full retirement years, let alone leave a legacy for children, says Just CEO Deane Moore.
“Our study reveals that half of pre-retirees (at least aged 55), representing two thirds of the total respondents, have not yet calculated how much they will need in retirement. Overall, many lack confidence that their money will last and reveal a high reliance on children and family to support them should it run out. The results raise the question of whether children should be more involved in their parents’ retirement planning.”
In a challenging political and economic landscape, Moore questions whether this is not the time to consider a shift in emphasis on the notion of a financial legacy. “Perhaps the best gift for grown-up children is freedom from the potential burden of financially supporting their retired parents. This is particularly true for the so-called sandwich generation, who are supporting both their dependent adult children and their parents simultaneously - a big ask for much of the population who may already be finding it difficult to make ends meet and save for their own retirement.”
The 2019 Just Retirement Insights also reveals that while leaving a financial legacy is important, it is not as important as receiving a guaranteed income for life. Furthermore, independent international research revealed that most people aged 50-plus would prefer to enjoy their retirement years, rather than curb their spending to save money to gift to loved ones.
Moore concludes: “Retirees are starting to realise that there are trade-offs in retirement and having an income that lasts and leaving a legacy are often opposing ideas. Instead of being conservative in order to leave money to heirs, retirees should be looking to reduce the risk of depending on the next generation later in life.
Regrettably, what many people still do not realise is that through a blended living annuity, which uniquely has a life annuity as an investment portfolio option, pensioners may be able to afford a secure, guaranteed income throughout retirement, which in turn should reduce the risk of having to turn to children for financial support in those final years.”