The R150,000 mistake that could cost you R1 million by retirement

Every time a South African changes jobs, a critical financial decision follows: what happens to their retirement savings. Yet research shows that 60-70% of South Africans cash out their retirement funds when leaving an employer - often to cover short-term expenses, settle debt, or upgrade their lifestyle - without fully grasping the long-term damage.

With most professionals now changing jobs every two to three years, according to CareerJunction, this is no longer a once-off choice. It’s a pattern, and one that is silently eroding future financial security.

Take Sarah*, 31, who cashed out R120,000 from her first retirement fund to pay a deposit on an apartment. Fifteen years later, her retirement savings are less than half of what they could have been, forcing her to accept that she will likely have to work for far longer than planned.

Her story isn’t exceptional. It’s becoming the norm.

“Cashing out feels harmless because the consequences are invisible at first,” says Pedri Reyneke, CEO of Multilink Financial Services. “Financially, it’s one of the most destructive decisions you can make early in your career. That money doesn’t just disappear, but it also stops compounding, stops growing tax-efficiently, and stops working for you for decades.”

The numbers are stark. A 30-year-old who cashes out R150,000 today could have around R550,000 by age 50, and well over R1 million by retirement, assuming modest growth. Withdraw it now, and that future simply never exists.

For many South Africans, this is the moment their retirement quietly dies - without them even realising it.

“You’re not simply sacrificing a holiday or a car. You’re sacrificing future choices - when you retire, how comfortably you live, whether you stay independent, and whether your money lasts as long as you do.”

When leaving a job, most South Africans have three main options:

Preservation fund: Keep the money invested and tax-efficient.

Transfer to a new employer fund: Simple and consolidated, but often with limited investment choice.

Retirement annuity (RA): Greater flexibility and long-term control for those building independent wealth.

Yet most decisions are made under pressure: during job negotiations, relocations, or lifestyle shifts when short-term thinking dominates.

“People think they’ll ‘fix it later’ when they earn more,” Reyneke warns. “But later rarely comes. One cash-out can delay retirement by years. Repeat it across three or four job changes, and even high-income earners can end up financially exposed.”

Career changes, he says, should trigger financial planning instead of impulsive withdrawals.

“This is not admin. It’s a turning point. Professional advice at this stage isn’t a luxury; it’s a safeguard. The difference between cashing out and preserving can literally be the difference between retiring with dignity or working far longer than you ever planned.”

Retirement isn’t built through one big decision at 65. It’s shaped by small choices made at 25, 30 and 40.

“Your future isn’t a backup plan,” Reyneke concludes. “And once you spend it, there is no refund, no reset, and no second chance.”