The 2023/2024 Retirement Reality report by 10X Investments reveals a worrying statistic: only 6% of South Africans have enough savings to retire comfortably.

For many, this means that working longer, along with strategic financial planning, could be essential for improving retirement prospects.

One additional year of work can make a significant difference. For example, if you earn R80,000 a month and save 15% for retirement, that’s an extra R144,000 in savings for the year.

But the benefit goes beyond savings—it means one less year of relying on those funds.

Working longer not only allows more time for savings to grow, but it also shortens the retirement period, reducing the overall drawdown from savings.

Investments also play a crucial role. A R5 million retirement portfolio, growing at 6% above inflation, could add R300,000 in a year without any extra contributions.

This growth can help offset expenses during retirement, covering months of costs with no additional effort from the saver.

Cutting back on living expenses before retirement can also have a big impact. For instance, reducing monthly spending by R5,000 could decrease the total amount needed for retirement by R1.2 million, assuming a 5% drawdown rate.

Not only does this allow more money to remain invested, but it also reduces the amount of tax paid on retirement withdrawals, helping to preserve more capital.

Investment fees, often overlooked, can have a significant effect on retirement savings. A 1% fee on R6 million in retirement savings may not seem substantial, but if fees rise to 2%, it could require reducing the drawdown rate or working longer to accumulate enough funds.

Fees can erode returns over time, delaying retirement or forcing adjustments to withdrawal plans.

Many South Africans are finding creative ways to supplement their retirement income, such as renting out property or taking on consulting work.

These additional income sources reduce the reliance on retirement savings and offer greater financial flexibility.

Lifestyle changes, such as downsizing a home or cutting transportation costs, can also help retirees reduce their expenses. Retirees often find they can live more economically by adjusting their habits, such as cooking at home or reducing unnecessary travel.

Ultimately, retirement readiness is about balancing savings, managing expenses, and considering options for supplementary income.

By working longer, reducing spending, and making informed investment choices, individuals can significantly improve their financial position and retire with greater confidence, said 10X.