Retirement income specialist Just, launches the 2019 findings from ‘Just Retirement Insights’ – a comprehensive review and commentary based on face-to-face interviews with over 520 pre-retirees and retirees. The third tracking study of a series, Just Retirement Insights aims to understand the South African retirement market and their retirement needs in a changing economic and political climate.

Interviews were conducted by an independent data collection company and respondents were selected using a random sampling technique. Respondents ranged between the ages of 50 and 85 years old, living in Cape Town, Durban and Gauteng.

The key findings of the study revealed several major challenges facing today’s retirees, arising from common misperceptions of retirement income.

81% of respondents indicate a strong preference for a stable monthly income in retirement that covers their expenses, rather than one that fluctuates depending on investment performance. Many cannot tolerate the risk of a decline in investment markets. However, the reality is that the majority of South African pensioners are exposed to these risks in a living annuity.

Half of the respondents said they would rely on children or grandchildren should they run out of money, yet paradoxically they also shared the belief that it is important to leave an income legacy for the next generation.

Eight out of ten respondents said that they set and worked towards financial goals, while 60% of respondents acknowledged putting more thought and planning into their finances (a 20% increase from 2018). Yet, when asked if they had done any retirement budgeting, over half (53%) admitted that they had not calculated how much they would need per year and just under half (48%) lacked confidence that their money would last.

The study reveals a misplaced optimism from retirees and pre-retirees about the amount of retirement savings required to cover their expected lifetime. 80% have less than R2 million in retirement savings and more than half of these expected a monthly income in retirement that is significantly higher than the sustainable income that can be purchased in the market.

More concerning is the fact that while two in five respondents cannot afford to lose any retirement fund money before it seriously affects their retirement plans, almost three quarters claimed they will not seek any form of professional financial advice.

Our key concern rising from this latest study is the high proportion of people approaching retirement who have not saved enough, yet expect an unrealistically high level of income from their existing retirement pot. Few people realise that they can sustain a 2,5% p.a. higher level of income in retirement, and guarantee this for life, by using a life annuity or a lifetime income option within a living annuity. It highlights the important role of careful planning to help make informed decisions around the effective use of limited resources.

Deane Moore is the CEO of Just, specialists in retirement income solutions.