What if you don't have enough saved for retirement?

Planning for your retirement is imperative to ensuring you enjoy your golden years. The last thing you want is to struggle to make ends meet.

So what should you do if you realise you won’t have enough saved to retire comfortably? JustMoney asked some industry experts.

Tip: Have you worked out how much you’d need to retire? Click here to try out our calculator.

Hitting the middle-age hump

According to Reagan Mitchell, managing director at WealthyMe, most South Africans don’t save enough to retire with financial independence, and this becomes more evident to people as they reach middle age.

“This is the reality for most people who never had access to high-quality financial advice and financial literacy. In addition, many consumers only earn enough to make ends meet. Consequently, planning for retirement is exceptionally low on their priority list – and rightfully so,” says Mitchell.

With that said, he points out that there are benefits to various retirement savings vehicles available to consumers. He explains that middle-aged people will often have more disposable income available to save because their kids are grown and they will likely have settled some of their liabilities.

“As a result, they can now channel more funds into their retirement savings vehicles, such as tax-free savings, endowments, unit trusts, and shares,” says Mitchell.

Additional sources of income

In addition to retirement savings vehicles, Mitchell explains that consumers need to consider other avenues to create additional income sources.

He illustrates that this could include starting a small e-commerce business, or even something as simple as baking cakes over weekends to supplement a savings strategy in the event of late preparation.  

“People live longer and they’re healthier because of advances in medical technology and wellness activities. Therefore, people who don’t have sufficient provision at retirement should consider working longer or starting a small business to bolster any shortfalls for retirement planning,” says Mitchell.  

“Bear in mind that starting a business comes with its own risks, which should be carefully evaluated before venturing forth. However, there are many ways to mitigate this risk, such as partnering with someone, getting informed about the market, or starting off simply and growing slowly,” he explains.

What else can you do?

Guy Chennells, general manager and head of employee benefits at Discovery, agrees that you will need to cultivate assets post-retirement – a skill, network, or toolset you could use when formal employment ends.

Besides this, Chennells believes that the best way to increase your retirement saving is to start by saving what you can afford, and then to increase your contribution each year as your salary increases.

“In addition, if you delay drawing an income from your savings for 5 years, you will be able to get about 20% more income every year thereafter. If you also continue to contribute during that time, your income will be about 40% higher,” says Chennells.

This is because of the benefits of compound growth.

What if you still don’t have an RA?

According to Mitchell, buying a retirement annuity when you’ve passed middle age is still the preferred vehicle because of the associated tax benefits, protection against creditors, and the fact that the proceeds from a retirement annuity don’t form part of your executable estate.

However, he adds that there are other things to take into consideration relating to your personal circumstances that may warrant other types of savings vehicles. 

“The best is to meet with a financial planner who can assist you to come up with a customised comprehensive strategy to retire financially independent,” says Mitchell.

If you don’t have a retirement annuity yet, click here and fill out the form to get started.