If you want an income that lasts in retirement, don’t eat the marshmallow. What does this mean? It means being able to say no to an unnecessary purchase today on behalf of a greater prize – financial certainty and dignity when you retire, says Twané Wessels, an actuary at financial services group Just SA.
A commonly referenced study conducted by Stanford University offered children a choice of having one marshmallow right away, or two marshmallows if they waited 15 minutes. In follow-up studies, researchers found that the children who could wait the 15 minutes for two marshmallows tended to do better in life.
You need a lot of money to retire comfortably. “Let’s say you’ve saved R1 million for your retirement. While this seems like a lot of money, it is important to consider how much monthly income this amount can get you. For example, a 65 year old female is able to get a life annuity that will pay an income of about R6,700 per month, which will increase in line with inflation.
There are many reasons why South Africans don’t save enough for retirement, said Wessels. Some people simply can’t afford to save anything. But others simply have poor savings habits. It is common to find many South Africans living beyond their means. “We need to help South Africans understand why it is important to behave more cautiously with their money,” said Wessels.