Don’t become a millennial statistic…plan and invest in your retirement now

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Retirement…a time in that distant future when you hope to be financially independent, travel, do the things you never had the time or money to do. But you’re still young and healthy and you’ll worry about that in a few years’ time. Wrong! The truth is, if you have not already started planning and saving sufficiently and effectively, it could cost you dearly.

July being National Savings Month, perhaps now is as good a time as ever to seriously think about and plan for your future.

The latest research statistics paint a shocking picture: those who are most at risk from deficient and deferred retirement saving are millennials, the golden generation of people currently aged between 18 and 34. Many of them don’t lack the means to provide for their later years; they simply don’t spare it a thought. And they don’t seek advice. Are you one of them?

Most start saving too late
Anthony Palmer

Carrick Wealth Director of Corporate and Client Solutions Anthony Palmer CA (SA), says most people start saving too little too late for their retirement, which according to the most recent research could leave more than 90% of South Africans with insufficient income when they retire. One should start saving for retirement at least in your early twenties.

And another neglected area, if you are still young and plan on having children or already have small children, is to save for their education, something that is going to become prohibitively expensive in years to come. (Read more about education inflation here.)

New research recently commissioned by Old Mutual Unit Trusts revealed that while millennials are indeed saving more than their parents did – 69% of them having savings accounts – only a dismal 44% of them are investing in pension or provident funds. But even many of these may be investing too little or inefficiently for their retirement.

Inflation will erode your savings over time. And compounding the problem is that due to improved nutrition, medical and technological advancements, and better lifestyles, life expectancy for humans is constantly increasing, with some current studies already predicting around 100 years or more for people now being born. Most millennials are likely to live longer than their parents’ generation. What this means in practical cash terms, is that you will need more money for a longer period of retirement to live comfortably and meet all regular as well as unforeseen expenses.

As millennials, according to the research, also prefer not to be formally employed or do not stay with one employer for very long, they are more regularly prone to dipping into their savings, which negatively affects their compound interest earned. Add to that the ever-rising cost of living, with average households now spending 67% of their income on living expenses compared to 62% last year, and it becomes alarmingly clear that your savings could disappear even before you reach average retirement age.

The most recent Sanlam Benchmark Survey also paints a grim picture. Currently only 6% of South Africans will be financially independent when they retire, with people saving too little at a 7% rate versus the suggested minimum rate of 15% of their income. Furthermore, 90% of people do not ever review their pension options after initially signing up for a pension or annuity, and 38% don’t ever seek retirement saving advice, or leave it until they actually retire, which is far too late.

How to invest for your retirement

While it is a good habit, simply saving money in a bank account won’t do the trick: bank accounts will seldom, if ever deliver the real growth required to beat inflation. Equity-based investment options, or investing your retirement savings into the markets, is where you will get the most growth and best protect the buying power of your money over the long-term. But it can be a complex and daunting prospect, with many investment structures to choose from. So, this is where you will need expert advice.

In a recent interview with the South African Institute of Chartered Accountants, Palmer summed it up as follows: “Get professional advice. Carrick Wealth is in the business of retirement planning. We understand wealth management, savings plans, the simple power of compound interest, and the destructive power of inflation. Too often, people are caught up in the “now” and at some point, their hope slips into fear, and that inevitably leads to inaction. That’s why your retirement must be a plan, not a hope”.

Don’t delay, and don’t become one of the negative retirement statistics. For more information and expert advice, contact Carrick today at [email protected]

  • Carrick Wealth is a registered South African financial services provider specialising in South African and international financial planning and integrated wealth management solutions. Carrick is also licensed in Zimbabwe, Botswana and Malawi, and holds three global licences in Mauritius. Carrick at all times maintains its independence with regard to product providers and asset managers, providing bespoke risk assessment, financial planning and other services to high net worth individuals (HNWI). Through our own qualified and experienced wealth specialists, as well as through partnerships with industry leaders in the fields of foreign exchange, tax, international property, offshore bank accounts, trusts, wills and estate planning, Carrick is able to provide the highest levels of service for your financial planning and investment requirements, both offshore and domestic. This communication is intended solely for information purposes for the use of designated recipients and is not an offer, recommendation or solicitation to transact. While it is based on information available to the public and from sources believed to be reliable, Carrick makes no representation that it is accurate or complete or that any returns indicated will be achieved.