Three ordinary South Africans contrast their perfect post-retirement lives and their current savings.
In an experiment, Glacier by Sanlam took three ordinary South Africans with regular careers and savings and asked them what they imagined their perfect life to be. The campaign was positioned to reveal the emotions, expectations and behaviours of working class individuals and understand their attitudes toward retirement.
The three were – Deon Koch, a civil engineer, Josephine Mbire, a customer support manager and Karin Henriques, a communications manager. Their answers were used to put together a short film depicting their dream lives which was then revealed to them on screen.
Thereafter, they were each given an envelope containing their monthly retirement salary in today’s value, which they could use to make their perfect life a reality. The only condition was that they would not be able to work or receive an income from any other source. Essentially they would have to live with the salary provided.
All three turned the offer down, not knowing what the number in the envelope represented. However, the offer made to them was actually the respective monthly salary that the three participants are going to be able to pay themselves when they retire. The number was calculated based on their current retirement savings and monthly contributions. They refused the offer because they immediately saw that the salary was too little to achieve their post-retirement goals.
In the same way that a personal health crisis can sometimes jolt an individual into making lifestyle changes, the three were shaken by this financial wake-up call.
At their current rate of saving, their perfect lives would not materialise.
Following the experience, the three have emerged wiser, more disciplined and have developed a pragmatic approach to retirement.
“Before this, I didn’t really consider retirement too much, as I have no intention to retire. I must admit that I haven’t implemented any changes yet, but I am more mindful of seeing savings in the long term as an incentive,” said Koch.
Mbire believes she can still get “there” (i.e. reach her goals) from “here”, — although, destination “there” is now envisioned more realistically.
“Since participating in this campaign, my goals are the first thing I think about in the morning. Every day I’m thinking about how I can improve,” she says.
Jaco-Chris Koorts, an actuarial consultant at Glacier by Sanlam says that everyone should take into consideration everything they plan to spend money on in retirement – including healthcare, food, entertainment and travel.
“It’s important that people are made aware of the importance of saving, as well as the importance of starting to save early on in one’s career,” says Koorts.
Over the years an early retirement was often perceived to be a sign of financial success. It’s not anymore.
According to Koch, it would probably be a good idea to work up to a later age. Despite a desire to live a more productive and engaged life, his response is driven by financial practicality.
“I probably still won’t retire – life has too much to offer, and I try to find meaning in what I do. Besides it will be unaffordable to retire,” said Koch.
With some careful planning, many of one’s working-life responsibilities – such as childcare costs, school fees, mortgage payments and other expenses in maintaining a busy household – should vanish in retirement.
Henriques says she now has a rough idea of how much it will take to maintain her lifestyle in retirement. With the new economic realities and new retirement dreams, she has realised that new financial solutions are needed.
“Physically I won’t be able to save more money because I would be cutting my current lifestyle. My husband and I have explored ways of relooking our investments, changing the makeup of the investment portfolios or perhaps generating a second income stream,” said Henriques.
She says a common misconception is that one thinks they have the full picture, but an experience like this can help you to reframe your view of retirement. “You will start asking critical questions from ‘How much money do I need to retire?’ to ‘Can I maintain my current lifestyle on a month-to-month basis?’”
“The next time you’re deciding how much to save, picture your aged self in the future, doing all of the great things you want to do in retirement. Then, think about the cash you’ll need to make that happen,” says Justin Cohen, a motivational speaker and life coach who worked with the individuals in this campaign.
Source: http://www.moneyweb.co.za/in-depth/sanlam-by-glacier/are-you-saving-enou...