The last year of lockdown could impact the age you retire in South Africa

The average South African is struggling to manage their finances in the wake of the Covid-19 pandemic, while even prior, the country had a dismal track record of saving, says André Wentzel, head of client solutions savings at Sanlam.

As the country faces a third wave of infections many are still recovering from the devastating financial impact of the pandemic, he said.

This has resulted in consumers tapping into their retirement savings and investments prematurely to make ends meet. This can have a significant impact on the income one can expect to receive in retirement, warned Wentzel.

While the average age of retirement in South Africa was officially reduced to 60 in 1995, he said that most people are not able to retire comfortably at that age based on their pension savings.

“The traditional concept of retirement was adopted 130 years ago, in a different environment, for a different generation.

“Since then, the average life expectancy has increased drastically and many people are living well past their retirement age. It is worth considering the impact that delaying your retirement can have on your financial situation in retirement.”

The financial impact of delaying your retirement

Wentzel said that delaying your retirement by one, three or five years could fundamentally change your overall savings and enable a better quality of life once you stop working.

“Firstly, let’s consider someone who started saving 20% of their income at age 25 and is on track to retire at age 60 and maintain their standard of living.

“Retiring either a year earlier or a year later can have a 7% to 8% impact on their income. If that’s increased to three years, you could expect to receive 20% less income if you retire early but nearly 24% more income if you retire later,” he said.

If this person were to retire at age 55 they would receive 30% less and 42% more retiring at 65. “So, retiring at 65 instead of 55, which is the earliest you could access your savings, means your income in retirement is more than double.”

Similarly, retiring later could help improve your circumstances if you fall behind, whether it’s because you started saving later or because you had to pause your contributions or tap into your savings due to circumstances like we are experiencing with the pandemic, said Wentzel.

“The rough rule of thumb is that for every year you paused your savings or delayed starting, you can make up for it by retiring one year later.

“For example, a 60-year-old retiree who saved without interruption from age 25 can expect about the same income as a 70-year-old retiree who started at 35 or who started earlier but who tapped into and depleted their savings at 35.”

He conceded that not every individual is in a position to be able to choose to continue their employment beyond retirement age. Many people are also choosing “semi-retirement” – continuing to work part-time after their official retirement to supplement their income.


Wentzel said that some of the ways to supplement your income in retirement and ensure the longevity of your retirement savings include:

  • Consulting and part-time work: Several studies show that older, experienced employees can increase productivity and employment opportunities for a company. Consider semi-retirement which will allow you to consult and do part-time work to bring in an extra income.
  • Local services: If you are retired, you have the option of helping those around you. Hobbies can also help you earn an extra income, such as walking the dogs in your neighbourhood, running errands or house sitting.

“Whether or not you consider delaying your retirement or supplementing your post-retirement income, it is important to have a plan in place.

“In a recent Brand Atlas survey of middle-income earners in South Africa, 41% believe their retirement plans are “a bit vague” and only 1% have a well-thought-through plan which is being carefully executed.”

Read: Big changes planned for grants and social security in South Africa – including a new basic income

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