There is no doubt that trying to save for one’s retirement is not an easy exercise especially when you are entering the job market, but could “soft saving” be an option. Picture: Nappy.co
On the back of watching millennials struggling to save for retirement, Gen Z’ers are expected to find it even harder to save for retirement. This is according to Asavela Gwele, a 10X investment consultant.
Gwele argued that Generation Z, those born between 1997 and 2012, will be the generation that faces the biggest hurdle to save adequately for retirement after a legacy of previous generations that have not saved enough into their golden years nor have left enough for their successors.
Gen Z however have more financial information, investment vehicles and opportunities than previous generations.
10X Retirement Reality Report said only 6% of South Africans will be able to afford to retire, comfortably.
The research also noted that most South Africans haven’t formally planned for retirement.
“Roughly two-thirds of adults are either not saving at all for this purpose or their retirement plan is vague. The remaining third have a relatively solid grasp of what is necessary to fund their retirement years,” according to the report.
“Those who have planned, meanwhile, are not confident that they are on track to be able to support themselves for the long-term considering inflationary pressures and the economic climate,” according to Gwele.
Essentially, Gwele said that Gen Zs don’t have the best examples to learn from when it comes to their own retirement journeys but this does not mean that they should lose hope of ever being able to retire comfortably.
Gen Z have time on their hands and that is a luxury.
“With any long-term investment like saving for retirement, time matters a great deal,” she said.
“That’s because time allows compound interest to work its magic. So, even if you’re only able to put away a relatively small amount every month, you’re going to be better off in the long run than if you try and put more money in later on,” Gwele explained.
There is a new international trend called “soft saving”. This is when people prioritise spending their money on experiences rather than saving for the long term.
Gen Z’s don't want to give up on their experiences and Gwele argued that this generation can use their savings for experiences to shift how they think about retirement.
“If you can match what you save up for your annual holiday and add that to your retirement savings, suddenly committing to those savings feels less like it’s about making it through the day-to-day of old age and more about still being able to have incredible experiences long after you stop working,” she explained.
When it comes to saving for your retirement, there are some fundamentals that everyone should follow.
Gwele said that Gen Zs should have a strict criteria when it comes to choosing a retirement saving plan.
“Ideally, you should look for a product that has consistently beaten long-term industry returns, is properly diversified, has demonstrated resilience, has transparent, easy-to-understand fees, and doesn’t include performance fees,” she emphasised.
“While South Africa’s economic issues are very real, Gen Zs are entering the workforce at a time when there’s never been a greater variety of financial products and relevant financial information available.
“If they can leverage the best of those products and take in the information available then they can give themselves a really good chance at a comfortable retirement,” she added.
IOL
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