In a belated attempt to complete my literary education, I have been working my way through some of the classics. I am currently reading Crime and Punishment by Fyodor Dostoevsky. Apart from being amazed at how little the world and human nature have changed over the past 140 years, I was struck by Dostoevsky's description of a murder victim. She is depicted as a diminutive woman of 60, with a withered-apple-like skin and a neck resembling a chicken leg. (There is also a description of a 43-year-old with prominent crow's feet and bearing a faint resemblance to the beauty of her youth ... think Desperate Housewives.)
Dostoevsky's portrayal of the elderly murder victim does not do justice to many of today's 60-year-olds. Think of a famous person who will turn 60 this year, such as George W. Bush, or our own Anton Goosen (who celebrated at the airport between gigs), Patsy from Absolutely Fabulous, Dr Brooks from Lost or Sly Stallone. Then there is Cher, who is only as old as her most recent facelift. And Chuck Norris, who was born in 1940, did not even turn 60, as 60 turned and ran when it saw him coming. Even Arnold Schwarzenegger, the Terminator, is nudging the Big Six O.
While she is certainly the exception, imagine the retirement funding issues facing Benedykta Mackiello, who turned 113 this week. Mackiello claims that her biggest worry is that she will never die.
People are generally living longer than in past generations. Do members of the younger generation have any inkling of how increasing longevity will affect them financially when they reach old age, and of how the decisions they make today will shape their financial security when they are in retirement?
Teenagers tend to believe they are invincible and that only kryptonite can harm them. It seems that many people carry this belief into their 20s, and translate it into financial invincibility.
They believe they can wait before they start building up their wealth and at the same time quite happily accept that they will live for longer - a huge contradiction.
The problems caused by an ageing population and the looming pension burden in the European countries have been well documented.
In South Africa, we face the demographic consequences of Aids and poverty, and a large proportion of our population is under the age of 25. However, those in a more fortunate position have an obligation to themselves and society to start preparing for retirement early.
The most powerful number to show any 25-year-old is the impact on your long-term investment goals of saving during the 60 months between 25 and 30.
Let's say you can afford to put R500 a month (the payment towards a home theatre system, or a fancier car or four CDs) into an investment that yields 15 percent a year. If you start at 25, you will have saved over R15 million by the time you retire at 65. But if you wait until 30 before you start contributing, you will have R7.3 million, which is less than half.
Those 60 contributions make the difference, because they occur at the start of the compounding process.
I have not taken the tax efficiency of the investment vehicle into account, and I have assumed that the monthly contributions come from after-tax money.
To expect a return of 15 percent over the next 40 years may be a bit ambitious, given our lower inflation environment, but it definitely illustrates the point. At lower returns, the differential is a bit less pronounced, but assuming returns of between 10 and 15 percent, you end up with between 40 and 55 percent less if you start at 30 years of age as opposed to 25.
Tip number 17 of "The Best 100 Money Tips Ever" on Personal Finance's website states that it is time in the market and not timing the market that counts. This is never truer than when you are young and have time on your side. The ups and downs of the stock market will be much less important to you when you start investing at the age of 25 and have 40 years to build up your retirement wealth.
That said, investing is not only about putting money into the stock market. It also boils down to consuming less than you earn and putting the extra money into something that will, at worst, keep up with inflation. It can be an equity fund, a balanced fund, or paying off debt taken out against a growth asset, to name but a few options. However, putting your money into growth assets from an early age pays huge dividends.
To the 20-somethings out there, if you are fortunate enough to be employed, I urge you to think twice before buying another "lifestyle asset", such as designer furniture or a faster car, in favour of putting a few hundred rand towards your retirement. You have time on your side, and you may live a lot longer than the previous generation. Use the time and the money you have now wisely.
- Anet Ahern is the chief executive of Sanlam Multi-Manager International.