By Khwezi Jackson
You may have heard of the Fire (Financially Independent, Retire Early) crowd and the Yolo (You Only Live Once) gang. How about the SLiCLiGs (Save Like Crazy & Let It Grow)? Yes, I know, the name needs work but, believe me, the clunkiness of the acronym is more than made up for by the simplicity and the genius of the underlying formula.
10X Investments has just released its fourth annual Retirement Reality Report (RRR21), which shows SA’s retirement crisis getting worse by the year. We know that times are tougher than before but somehow I had hoped that people were at least becoming better informed.
Unfortunately, though, nearly half the people surveyed (48%, up from 46% last year) think they can save for retirement in less than 30 years. The fact that most people think they can leave it late (i.e. to the final 20 or 30 years of work) is a basic and fundamental problem that robs people of a huge portion of their would-be retirement income.
They are acting against one of the key rules of successful investing, which was outlined by Warren Buffet when he said: “Investing is not about timing the market but time in the market.”
The RRR21 makes it clear what an individual saver loses by starting late. In a section highlighting the difference between saving for 30 or 40 years, the report states: “In the context of a consistent savings plan, earning a net real return of 5% (after fees and inflation), saving for 40 rather than 30 years will deliver a retirement income that is 83% higher. Or, to put it another way, people who save for only 30 years instead of 40 will have to make do with an almost 50% lower retirement income.”
The RRR21 is based on findings of the 2021 Brand Atlas Survey, which tracks the lifestyles of the universe of 15 million economically active South Africans (those living in households with a monthly income of more than R8,000).
I am certain if you were to ask people who are in retirement or approaching it, 9 out of 10 of them would tell you they wish they had started investing earlier. Let us be the generation that learns from those who have travelled the road to retirement ahead of us. We don’t have to repeat the mistakes they made.
We have time on our hands! It has been said that the best time to start saving for retirement is when you receive your first paycheque; the second best time is now.
The RRR21 has shown how many people who, even though they are saving for retirement, are unsure they will have enough money to preserve their lifestyle in retirement: 79%! That is nearly 4 in 5 retirement savers worrying about funding their retirement years, never mind treating themselves to a new hobby or a trip to visit the grandchildren.
If you have time on your side don’t misuse it; use it to secure your financial future.
When you ask people what they did with their first paycheque, you’ll hear some wild stories about buying a bucket of KFC or even blowing it all in one weekend (and having to borrow money to make it to the next weekend, nevermind Payday #2).
In July 2018, one day before my 22nd birthday, I received my first proper paycheque of R2,500. I remember depositing R800 into my retirement annuity, after which I made regular monthly contributions of R400.
I had learned from a very young age that investing requires discipline at first but it soon becomes a habit. It was important to me to invest a portion of my first salary before I got used to spending the full amount that I earned every month.
If you feel like you are running out of time and your calculations show that you are not on track to retire comfortably, you will have to extend your working career and/or increase your monthly contribution to your retirement fund. Unfortunately, this will require some sacrifices in the short term, but it will buy you peace of mind and some comfort in the longer term.
If, however, you have time on your side, don’t miss out on the chance to get ahead of the game. Save at least 10-15% of your income from the start to make it more affordable and manageable to set yourself up for a comfortable retirement. The more you postpone that start date (or, worse still, if you force a restart by withdrawing your retirement savings when you change jobs), the higher that monthly contribution will need to be to catch up for the lost time.
South Africa has been sitting on a ticking time bomb for decades. This will not change unless we change it. Spread the word: Save Like Crazy and Leave It To Grow. The way to live the dream is to start investing as soon as you can.
Khwezi Jackson is a millennial, an early adopter of great ideas and an Employee Benefit Consultant at 10X Investments.