Expectations of retirement income don't add up
Respondents ranged between the ages of 50 and 85, and lived in Cape Town, Durban and Gauteng.
“Eighty-one percent of respondents indicate a strong preference for a stable monthly income in retirement that covers their expenses, rather than one that fluctuates depending on investment performance. Many cannot tolerate the risk of a decline in investment markets,” says Just chief executive Deane Moore. However, the reality is that most are exposed to these risks in a living annuity, he says.
Half of the respondents said they would rely on children or grandchildren if they ran out of money, yet, paradoxically, they also shared the belief that it was important to leave an income legacy for the next generation.
Eight out of 10 said that they set and worked towards financial goals, while 60 percent of respondents acknowledged putting more thought and planning into their finances (a 20percent increase from 2018).
But, when asked whether they had done any retirement budgeting, more than half (53 percent) admitted that they had not calculated how much they would need a year, and just under half (48 percent) lacked confidence that their money would last.
“The study reveals a misplaced optimism from retirees and pre-retirees about the amount of retirement savings required to cover their expected lifetime,” says Moore.
Eighty percent have less than R2 million in retirement savings, and more than half of these expected a monthly income in retirement that is significantly higher than the sustainable income that can be purchased in the market.
More concerning is the fact that while two in five respondents cannot afford to lose any retirement fund money before it seriously affects their retirement plans, almost three-quarters claimed they would not seek any form of professional financial advice.
“Our key concern arising from this latest study,” says Moore, “is the high proportion of people approaching retirement who have not saved enough, yet expect an unrealistically high level of income.
“Few realise that they can sustain a 2.5 percent a year higher level of income in retirement, and guarantee this for life, by using a life annuity or a lifetime income option within a living annuity.
“It highlights the important role of careful planning to help make informed decisions around the effective use of limited resources.”