According to a Sanlam benchmark survey, 70% of people who resigned or were retrenched between 2011 and 2012 spent all their retirement money on luxuries or paying short term debt.
What this tells us is that most retirees spend retirement money on luxuries.
After spending decades working and saving towards retirement, trends indicate that most retirees in South Africa opt for splurging once they receive their pay-outs.
This can be attributed to a number of reasons. For instance, retirees may just want to spoil themselves for their hard work, or they may genuinely be ill-informed in terms of smart spending and the benefits of investment.
An article in IOL reported:
“A consequence of inequality is that middle and low-income people live beyond their means, because they spend money on luxuries for aspirational reasons and to achieve instant gratification.”
Further research shows that the majority of consumers do not have a long-term savings strategy in place. So when retirees spend retirement money on luxuries they are essentially making themselves more vulnerable to rising inflation and high living costs, as well as the very real possibility that they won’t be live well financially in their retirement and old age.
People are tending to live longer, so they could spend as much time in retirement as they did working.
Advice on retirement money:
John Anderson, the head of research and product development at Alexander Forbes says, “Instead of buying one big luxury item once, you will derive more satisfaction if you spend on small luxuries more often.”
Your retirement savings should provide you with a stable monthly income that will enable you t maintain your standard of living throughout your retirement.
FA News advises:
“In order to survive financially, the majority of South Africans will have to work to age 65 or beyond, while many pensioners will have to find ways of supplementing their income early on in retirement to avoid drawing into their capital.”
A good rule of thumb is that 12 times your annual salary is likely to buy you a financially comfortable retirement.
Reprioritise your spending and consult a financial advisor.