Most of us have an idea that we will retire at 65 and live happily ever after planning golf a few times a week and traveling around the world and back again. Nothing further from the truth when you take a look at the stats of South Africans at 65 and their degree of financial independence.
In the 3 decades that I have been in the industry the statistics haven’t changed.
47% rely on their families for financial support
31% have to carry on working
16% rely on the state for a pension
This means that only 6% of South Africans are financially independent at age 65. This means that only 6 % of us can maintain our lifestyles after age 65 for the rest of our lives. What makes this statistic more challenging is the fact that we are on average living much longer than our parents. So the 6% probably waters down to half.
The stats are overwhelming. Retirement is an illusion for most of us.
Furthermore, many of us have the dream to retire by the coast and open that coffee shop which will provide us with the purpose and the income we need for the rest of out lives. Be careful! More often than not the business is a lot tougher than you imagine. Coffee shops needs a lot of coffee to cover the rent and expenses leaving very little behind for an income to maintain your monthly needs.
In many cases it would be a better proposition to keep the pension and use the bank’s money to float the business (if you can secure the finance). If you cannot get a loan than that would speak volumes to the feasibility of the business because if the banks are not interested then the chances of making it are diminished.
Pension funds are inalienable which means that your creditors cannot touch it if the worst happened and you went insolvent. So the sweet spot is found when you lend from the bank and keep your pension fund. At least you have something to fall back on.
Whether it’s just retiring or working at the coast it boils down to how much you need to maintain your monthly lifestyle and how long you will need to provide for. The ravages of inflation will place extra pressure on you as well.
The reality is that most of us will have to keep on working. Not a bad thing as it creates a purpose for us to get out of bed every morning. Just be aware of holding onto your pension for as long as you possibly can. You don’t get a scone chance to build it up again.