Are you avoiding making a plan for your retirement?

If you are one of almost 50 percent of South Africans who do not have a plan to provide for your retirement, you probably either feel defeated by your financial circumstances, are procrastinating or avoiding the issue.

But none of these reasons for avoiding getting a financial plan reduce your financial stress that impacts both your mental and physical health.

This is according to a survey conducted by FNB among more than 1 000 South Africans about how prepared they are for retirement.

No plan causes stress

The survey that found 48 percent of those surveyed did not have a plan to provide for their retirement and only 75 percent of those who do have a plan feel like they are on track to achieve a comfortable income in retirement, Samukelo Zwane, Product Head, FNB Wealth and Investments, said at a recent briefing on the survey.

A retirement plan considers the savings you have and the contributions you can still make and determines the income you can expect in retirement.

South Africans who are not on track for a reasonable retirement income reported high levels of anxiety and feelings of being overwhelmed, uncertain, inadequacy and even regret in the survey, according to Tracey Want, head of corporate employee investment and risk-based solutions at RMB, says in an article on the survey.

Defeated and in denial

She says those without a plan described having accepted defeat – the survey found these people believe they have no other option but to rely on the government’s older persons grant (R2 180 per person) or their family for support in retirement.

The survey found some of us are in denial and others are procrastinating using the vague promise of “one day I’ll get to it”, Zwane said.  

These respondents in the survey often had an “if … then” response when asked when they would start preparing for retirement  - for example, if I get a permanent job, then I will save or if I pay off my debt, then I will save, he said.

Want says these emotional responses often lead us to avoid taking decisions; but when we avoid addressing a subject, progress can become elusive, she says.

But delaying taking action is something you may later regret. Among the retirees surveyed by FNB many expressed regret for not prioritising retirement savings earlier in life, saying a lack of education and guidance was often behind their decision not to act in time to ensure a more secure future in retirement, Zwane said.

Not enough saved

Sanlam also interviewed more than 1 000 consumers about their financial concerns for its annual Benchmark report and found only 21 percent were confident that they had enough saved to last them throughout their lives in retirement.

The Benchmark survey found 58 percent believed they did not have enough and another 21 percent were unsure, according to Nzwa Shoniwa, managing executive for Sanlam Umbrella Solutions.

The Benchmark survey found 61 percent of respondents felt a sense of insecurity about their financial futures, 48 percent regretted not acting sooner, 41 percent said their financial stress was affected their mental health and 26 percent said it was affecting their physical health, Shoniwa said.

The benchmark report includes interviews with employers who use Sanlam’s umbrella funds. Four in 10 sub-funds reported an increase in absenteeism over the past two years due to stress, anxiety and mental health issues, he said.

Can’t afford it

The FNB survey found some South Africans have nothing or very little to save for retirement as they have high grocery or transport costs or are supporting family members.

But the survey highlighted that most South Africans are also servicing debt and if they knew how to manage their debt well, paying off the most expensive debt first, set aside savings for emergencies and insured their assets and their lives appropriately, their financial situation would improve giving them room to save and to grow wealth, Bheki Mkhize, CEO, FNB Wealth and Investments at FNB, said at the briefing.  

A short-term mindset that seeks instant rewards at the cost of larger long-term goals, however, can prevent this.

FNB says its survey shows that our ability to plan for retirement is heavily connected with other financial responsibilities: how we earn and spend money, and decisions around how we live our lives.

The bank says conversations about saving for retirement cannot happen in isolation. Providing for retirement is part of your overall life plan. Budgeting, financial planning, saving and debt management all form part of this conversation - and are relevant at any life stage, according to the survey analysis.

The two-pot opportunity

The two-pot retirement system will allow partial withdrawals from retirement savings on September 1 this year. But it also provides an opportunity for you to assess your retirement plan and your financial situation more broadly as funds and their administrators will be providing retirement statements, educational material and sessions and even retirement benefits counselling.

Belinda Sullivan, head of corporate consulting strategy at AlexForbes, said at a recent Hot Topics trustee briefing education and communication from your fund can help you, as a member, consider access to your funds responsibly and as part of your overall financial planning.

She says you should not access money in your fund just because you can, but have a goal-based approach that ensures a specific outcome that improves your debt or money management.

If you withdraw from your fund, or if your retirement savings are not on track, look out for assistance from your fund on how to make additional contributions to replace what you withdrew and/or increase the percentage of your income you are contributing each year as your earnings increase in order to close any gaps in your retirement savings.