Forced retirement - Know your rights, and plan properly

South Africa is sitting on a retirement time bomb, with only 6% of the population on track to retire comfortably. This is according to the 10X Investments Retirement Reality Report 2023. Rising inflation, interest rates that are at a 10-year high, ever-increasing food, fuel, and other living costs, combined with salaries that are simply not keeping up, are all contributing factors to South Africans simply being unable to save for the future.

The 10X report also reveals that 40% of retired South Africans did not stop working voluntarily. In 2021, 70% of retirees did so on their own terms but this has dropped to 60%, indicating that more employers are compelling their older workers to take ‘early’ retirement packages.

However, Martin Hatidani, Senior Manager: Memberships, Retirement and Investments at NMG Benefits, says that South Africa has no laws that compel people to retire. “You’re allowed to work for as long as you like, and employers may not discriminate against you because of your age. What you do need to take into account, is that your employer may require you to retire at a certain age if stipulated in your employment contract or in their HR policies. Not being aware of this clause may leave you vulnerable to being forced to stop working before you’ve reached your retirement savings goals.”

While your ability to retire comfortably rests on sound financial planning and the discipline of having saved from your very first pay cheque, Hatidani acknowledges that being forced to retire can be a very emotional experience. “If you are forced to retire before you planned, it is vital that you take some time to ‘cool off’. This is not the time to make irrational decisions. Vent to your friends and family and, most importantly, consult with a financial adviser to ensure that your savings are optimised.”

The first thing your adviser will suggest is a budget review, with expenditure cuts wherever possible. Discretionary or luxury spending, like holidays, eating out, and entertainment may need to be reduced. Downsizing your home or car might be a consideration. Your life insurance policies could possibly be adjusted to reflect your new circumstances – as an example, you may be able to cancel an income protection or disability policy, or reduce your life cover if you don’t have any debts.

The one area you should not be looking to save in is your medical cover. This is the time to prioritise your medical aid contributions and move onto the most comprehensive plan you can afford. People over the age of 60 typically claim more frequently and for more expensive procedures and treatments than younger people. If you wait until you need treatment, and upgrade your plan at that point, you will probably be penalised with a waiting period.

Your adviser should also check the age at which you can start drawing on your retirement savings. Some funds are available to policyholders at age 55, while some require you to wait until 65. Ask your adviser about reinvesting available funds and find out the tax implications on withdrawals.

Hatidani advises all retirees to stay active physically, mentally, and socially. “Many retirees struggle with loneliness, boredom, and a lack of purpose. But, with time on your hands, this is an opportunity to start a hobby, join a group that meets up regularly, or learn a new skill. Being able to monetise a skill or trade could also bring in a new revenue stream, potentially meaning that you could fund your lifestyle and delay accessing your savings for a few years.”