Imagine you are planning a long road trip with enough fuel to reach your expected destination, but then you discover that your destination is further away than you had planned. This is where millions of South Africans now find themselves in retirement. The plan was to make a short trip, but the trip itself has changed dramatically.
According to the World Health Organization, the average global life expectancy is now about 73 years. In South Africa, the total life expectancy of a 65-year-old is about 80.7 years, and those who reach 70 can expect to live up to 83 years. This is because global life expectancy has increased rapidly over the past century, driven by advances in medical technology, improved nutrition, widespread access to sanitation, and improved public health infrastructure.
This is a remarkable achievement in many ways. But it also creates a financial challenge that most traditional retirement models were never designed to handle. The old blueprint assumed a relatively predictable endpoint. Pensions were structured accordingly, set with savings targets in mind, and the concept of running out of money in retirement was, for most people, a theoretical concern rather than a living concern. That is no longer the case.
The reality for most South Africans is worrying. Nearly three in ten South Africans over the age of 50 say their retirement planning is probably or definitely not on track, according to 10X Investments' Retirement Reality Report. The difference is stark when retirement lasts a decade. This becomes a crisis spanning 25 to 30 years.
For many, the barrier is not apathy but financial pressure. When there's nothing left at the end of the month, retirement feels like a problem for another day. The risk is that another day comes sooner than expected, and the money is not meant to last that far.
Longevity Economy: A New Phase of Life
Economists and researchers have begun to refer to the over-50s as the “longevity economy”, a vast and rapidly growing segment of the population that is healthier, more active, and more economically connected than any previous generation at that age.
In South Africa, the number of people aged 60 and over is expected to increase from 3.6 million in 2002 to 6.6 million in 2025, and this figure is projected to increase. This is a generation largely deprived of access to financial products and services, yet clinging to old notions of what later life will be like.
The three-stage model of life, education, then work, then retirement, is giving way to something more fluid. The World Economic Forum describes this as the emergence of a multi-phase life, where career breaks, second jobs and flexible working become the norm rather than the exception. In South Africa, this is already a lived reality for many. Labor market participation among older South Africans, while still low overall, is changing, with older women in particular becoming increasingly economically active. Additionally, approximately 90% of South Africans under the age of 60 expect to continue working in some capacity beyond their formal retirement age, with many planning to take up part-time work or additional income sources. This is partly aspirational and partly a financial necessity driven by inadequate savings.
Living longer and staying healthier throughout those years means retirement expenses will last longer than ever before. Health care costs, inflation, lifestyle expenses and unexpected care needs increase in a 25 to 30 year retirement in a way that they do not in a 10 to 15 year retirement. The financial flexibility required is of an entirely different order, and South Africa's savings landscape makes this challenge particularly acute.
How much do you really need?
This is where many retirement plans fail, not because of negligence, but because of underestimation. According to the 10X Retirement Reality Report, an estimated 6% of economically active South Africans are on track to retire comfortably. This means that about 94% of the population is heading towards retirement without adequate provision.
A useful general guideline often used to figure out what you really need is what planners sometimes call the 300 Rule: Take your expected monthly living expenses and multiply by 300. The result is the estimated capital needed at retirement to maintain that income for 25 years, assuming a nominal depreciation rate of about 4 to 5% annually.
Consider the example of someone retiring at age 60 and living to age 85 or older. That means potentially needing 25 to 30 years' worth of income, or 300 to 360 months' worth of living costs to be funded from the pot they've stopped adding to. At a monthly expense of R20,000, the 300 rule points to an estimated required capital of R6,000,000. At R30,000 per month, this figure increases to R9,000,000. Although these numbers do not account for inflation, investment returns, changes in income, longevity beyond assumptions or unexpected health care costs, all of which will affect the real value of any pot over three decades, however, they do reflect the vast amount of capital needed to comfortably fund retirement.
Choosing the right retirement product matters a lot. The right choice depends on individual circumstances, health, other income sources and risk tolerance, and it is strongly advisable to seek qualified financial advice before making a decision. Retirement income solutions, such as life annuities or living annuities, each have different risks, benefits and suitability considerations depending on individual circumstances.
Creating a retirement plan that lasts
Longevity changes everything. Retirement is no longer a short, predictable phase, which fundamentally reshapes how planning should work.
Practical foundations start early. Carrying debt into retirement reduces flexibility and adds pressure to an already inflated income, and debt reduction is often considered an important objective in retirement planning. In general financial planning discussions, strategies such as working longer can have a positive impact by increasing contributions, delaying drawdowns, and allowing compounding to continue.
What happens along the way is equally important. According to the 10X Retirement Reality Report, approximately 56% of South Africans who change jobs withdraw their retirement savings, despite preservation being one of the most decisive factors in long-term outcomes. Each return resets the progress and weakens the final result.
Once in retirement, stability comes down to three variables: fees, drawdown rates, and diversification. These factors are widely recognized as influencing long-term stability in financial planning, while a well-diversified portfolio is essential to deal with long-term volatility.
Ultimately, longevity is not a risk. There is less preparation. The question is not just whether you can afford to retire, but also whether your plan can sustain the life you are likely to live for as long as you are likely to live it.
*Guelle is a Senior Investment Advisor at 10X Investments.
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