Retirement Planning, Your Future Self Is Counting on You

Retirement can feel a long way off when there are bills to pay, children to support and immediate financial pressures to manage. But every financial decision made today can have an impact on the income available decades from now.

And for many South Africans, that future income may be significantly lower than expected.

The 2026 Sanlam Benchmark Survey[1] found that the average South African retires at age 65 with a replacement ratio of just 25% – far below the 75% benchmark generally regarded as necessary to maintain a similar standard of living in retirement. Only 44% of members surveyed were confident they would be able to maintain their standard of living after retirement.

Start early. Save consistently. Preserve what you have.

According to Derek Pillay, Retirement Funds Principal Consultant at Aon South Africa, retirement saving is a long-term game, and compound growth makes time one of your greatest advantages. That is why accessing retirement savings before retirement can have consequences that extend far beyond the amount withdrawn.

“South Africa's two-pot retirement system has introduced greater flexibility, but members need to understand the cost of using that flexibility. A withdrawal can mean tax today – but potentially an even greater cost in lost investment growth tomorrow. The important question isn't only how much you will receive if you withdraw but also how much could that money have been worth when you retire,” says Pillay.

“The same principle applies when changing jobs. Cashing out retirement savings each time you leave an employer can significantly reduce what you eventually have available for retirement. Preserving those savings keeps them invested and gives them more time to grow,” he adds.

The 2026 Benchmark Survey found that among members who withdrew cash, only 32% preserved or invested the money.

Don't make long-term decisions for short-term reasons

“Financial pressure is real, and sometimes accessing savings may feel unavoidable. But retirement money should not become an annual financial “top-up” for holidays, major purchases or other nice-to-haves,” Pillay cautions.

It is also worth being cautious about investment trends. Markets move. Investment fashions change. Social media is full of people promoting the latest opportunity or suggesting that one investment approach is better than another.

“Retirement planning, however, is not about chasing the flavour of the month,” says Pillay. “It is about having a strategy that suits your circumstances, remaining appropriately diversified and staying invested through market cycles.

Having a retirement fund is only part of the equation. Understanding it is equally important. Around one in five respondents to the Sanlam report stated that they do not know how their retirement savings are invested, which highlights that retirement benefit counselling often happens too late, with most counselling taking place only at retirement.

By then, there may be little time left to correct years of inadequate contributions or poor decisions, says Pillay. “This is where the right professional advice can make a difference. A reputable financial adviser or broker can help you understand your retirement position, explain the tax and investment implications of different choices and help you consider whether your strategy remains appropriate as your circumstances change.”

But choosing an adviser should also be an informed decision. Do your homework. Check credentials, experience and track record, and make sure you understand the advice being given before making significant financial decisions.

South Africa's retirement system has evolved significantly, with improvements in governance, costs, investment design and regulation. The challenge is making sure members make the most of what is available. That means focusing on the basics:

·         Save early.

·         Contribute consistently.

·         Preserve your retirement savings.

·         Think before you withdraw.

·         Stay invested.

·         Understand your investments.

·         And get the right advice.

“Retirement planning is not about finding a magic investment or predicting which market will perform best next year. It is about giving your future self the best possible chance of financial security – and making informed decisions along the way,” Pillay concludes.

Disclaimer

The contents hereof should not be construed as legal advice on any matter. You should not act or refrain from acting on the basis of any content included in this communication without seeking professional legal counsel. This communication does not constitute or create a lawyer-client relationship between us.

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Deidre Beylis             

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[1] https://www.sanlamonline.co.za/corporate/retirement/benchmark-symposium