Pensioners who take a cash lump sum at retirement now deplete it within an average of just 14.6 months.
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Pensioners who take a cash lump sum at retirement now deplete it within an average of just 14.6 months.
This is according to Sanlam's Benchmark Survey, which found that within four to five years of retiring, half of pensioners can no longer maintain their pre-retirement standard of living.
The survey also found that one in three retirees experiences financial strain, while 47% carry debt into retirement.
"Pensioners who take a cash lump sum at retirement now deplete it within an average of just 14.6 months – a decline from the 30 months reported between 2011 and 2016.
"Within four to five years of retiring, half can no longer maintain their pre-retirement standard of living, one in three experience financial strain, and 47% carry debt into retirement."
The report also noted that healthcare has become another defining pressure.
"While 33% of retirees remain on the same level of private medical cover, 44% have either downgraded their cover or abandoned private cover entirely and now rely on the state."
According to the report, part of the problem is that many South Africans start planning for retirement too late.
While people believe retirement planning should begin around age 35, the survey found that many only engage with their retirement fund a few years before they retire.
Kanyisa Mkhize, chief executive officer of Sanlam Corporate, said: “Retirement confidence is not built in the final years before retirement”, adding that it is built over decades of a working lifetime through the decisions people make along the way: preserving their savings when they change jobs, increasing contributions where possible and managing debt.
“Retirement planning also does not stop when someone leaves work. The first few years after retirement are critical, because that is when a lifetime of savings is tested against the reality of living costs, healthcare needs and longevity,” Mkhize said.
“The Sanlam Benchmark tells us that people understand when they should start planning, but the reality is that many are making retirement decisions in a very difficult economic environment.
“As an industry, we must recognise the financial pressure many members are under. We need to work together with employers and advisers to help members plan earlier, access better advice, preserve more of their savings and increase contributions where they can,” Mkhize added.
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