THE two year increase in average life expectancy has raised the bar for South Africans hoping to retire with enough money, financial experts warned on Tuesday.
The average life expectancy improvement from 58.1 in 2010 to 60 years raises the predicament for the more than 90% of under-resourced South African retirees. This is according a recent report released Rapid Mortality Surveillance Report 2011.
A rule of thumb is that for every two years gained in retirement life expectancy, one more year of work is needed before retirement, according to Evelyn Doubell, executive head of private clients at Consolidated Financial Planning.
"The additional savings required for these extra retirement years makes the task of saving enough for retirement more of a challenge," she says.
An alternative would be to increase retirement savings or accept that standards of living during retirement would have to be adjusted downwards. "The more time you have until you retire, the smaller these changes need to be," she says.
According to Acsis head of business development Henry van Deventer the longer average life expectancy highlights the fact that consumers need to save more during their working years in order to adequately fund their extended period spent in retirement.
The increase in life expectancy becomes even more alarming when applied to retirees. According to research by the Organisation for Economic Co-operation and Development (OECD), the worldwide average life expectancy from retirement has in many countries gone up by more than 10 years over the last 40 years.
This trend is set to continue, and has a significant effect on South Africans planning for retirement, according to Mr van Deventer.
He says that given South Africa’s low savings rate and the "tough times" consumers are currently facing with rising living and food costs, saving for retirement needs to be top of mind for consumers, and even more so at this time of year when bonuses and salary increases are enjoyed by many.