Last week, I found myself sharing tasty croissants and fresh fruit with the CEO and founder of 10X Investments; Steven Nathan, and his knowledgeable team to discuss the 10X Retirement Reality Report 2019.

The Visionary leader began by outlining why the report was initiated and the motivations that led him to creating 10X. He was bold, honest and REAL. A breath of fresh air. 10x’s mission is to help people to retire with dignity. This spoke volumes to me, particular as a young black person.

The Black Tax Cycle

Failure to adequately prepare for retirement is one of the driving forces of Black Tax. If my parents are not able to save up enough for their own retirement, then taking care of them becomes my responsibility. So what happens when I decide to start my own family? How would I effectively provide for them, save towards my retirement and simultaneously take care of my parents? By the time that my retirement comes, the cycle would simply begin again. This is the harsh reality for a lot of South Africans. Failure to adequately save up for retirement is also fueled by other factors that the 10X Retirement Reality Report touches on.

What retirement gift do you intend to give your future self?  

The 10X Retirement Reality Report

The 10X Retirement Reality Report 2019 is a snapshot of the current local retirement landscape and the worsening retirement readiness of most South Africans. The report is intended to draw further attention to the retirement savings crisis in the country and to spark conversation.

The report is based on findings of a survey of more than 15-million economically active South Africans (earning R7600 or more). The findings in the report are worrying, particularly for young people.

The reality is that there is mounting financial pressure that is preventing people from saving for retirement. Times are extremely tough for many people, while many; especially youth, think of retirement saving as a low priority expense rather than an essential investment. Even those who are saving for retirement, have no idea whether their savings plan is on track or what proportion of their savings they are paying away in fees. They have given the wheel to Jesus!

What retirement gift do you intend to give your future self?  

The numbers and stats

The fact that 67% of people surveyed either have no retirement plan at all, or just a vague idea, highlights the need for more education on this topic (see below)

One of the fascinating questions that was covered in this year’s report includes analysis on how long people think they need to save for retirement to ensure a comfortable one. Most would argue that you should start as soon as possible.

Unfortunately, a large number of people believe that setting themselves up for a decent retirement can be done in a relatively short time, which is one reason why so many people leave it too late. In fact, more than a third of South Africans believe that a comfortable retirement can be achieved through saving for just 24 years or less. Highlighting that most people don’t think retirement planning is important. It’s an afterthought.

What retirement gift do you intend to give your future self?  

Interestingly, 76% of respondents accepted that they would need to keep earning some income after they retired, over and above the savings and/or pension they had accumulated (see below).

The real question is where will these jobs and additional income come from? Considering the high levels of unemployment and on-going retrenchments in South Africa.

Power of compound

Cashing out retirement savings when changing jobs is one of the classic retirement savings mistakes that many continue to make. Cashing out means starting again from the beginning. This can be very damaging as you forfeit on the compound growth that early savings generate over the years, which is one of the real game changers in long-term saving. 10X provides a graph below that puts this into context over a 40 year period.

The graph shows how large a portion of a retirement fund early savings make, and the damage that is done by cashing out.

Retirement saving for who, for what?

Of respondents in the report who said they were not saving for retirement, 55% said they simply could not afford to save money towards retirement. The reality is that the financial pressure that most people are under, compounded by a poor economy, has led to many not being able to save towards retirement. What didn’t come as a massive WTF, was that 80% of people under 35 who said retirement saving was not a priority at this stage (See below)

Sadly, lots of young people prioritize their current lifestyle, at great expense to their future selves. They want the big car, fancy clothes and lifestyle now! Most leaving it dangerously late to start applying their minds to implementing a retirement plan. Trading-off the now for later. What retirement gift do you intend to give your future self?  

It’s just 3% , what the FEES!

According to the report, 50% of respondents with a retirement plan didn’t know what fees they paid (See below).

It’s clear that most people aren’t aware of the massive impact that high fees has on the growth of their retirement savings. The report gives a fantastic example of this – In the context of a consistent 40-year savings regime, someone paying 3% in fees rather than, say, 1% pa, receives almost 50% less money at retirement. What the FEES! Side note, did you know that the fees on 10X’s retirement annuity are less than half the industry average?

Retirement gift  

We need to change the “afterthought” mind-set around retirement savings. What retirement gift do you intend to give your future self? Will you be a burden to your family or live a life of financial freedom because you made good and consistent decisions over a long period of time?

Tips and things to consider: