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CONVENTIONAL retirement – daytime TV, golf, looking for things you had just a minute ago and grandchildren – is a thing of the past, it seems.
An astounding 89% of very wealthy South Africans polled by Absa Capital, an affiliate of Barclays Wealth, want to continue working after the conventional retirement age.
The survey shows they plan to start businesses and take on new projects in their later years.
The percentage of South Africans who want to remain in work is one of the highest in the world, according to a global Barclays Wealth report entitled The Age Illusion: How the Wealthy are Redefining Their Retirement.
In Switzerland, for example, only a third of those polled want to continue working. Recently France was rocked by mass protests in response to the hiking of the minimum retirement age from 60 to 62 by 2018.
The urge to work among the wealthy in SA is not due to financial considerations; the survey shows high net worth South Africans were the world's most confident about their financial security in the 20-country survey.
And SA also topped the rankings by far as the nation most optimistic about retirement.
"The findings show that the concept of ‘nevertirement’ is expected to grow over the coming decades, with over 70% of (global) respondents under the age of 45 saying that they will always be involved in some form of work," says Nomkihta Nqweni, Absa Wealth managing executive.
Although South Africa does not have an official minimum retirement age, some institutions still enforce a strict retirement age policy.
But given the dire skills shortage in South Africa, there is a demand for many workers to keep on contributing.
Cameron McCallum, a wealth manager at Netto Financial Services, has seen an increase in the number of people who choose to work beyond the conventional retirement age.
"Often as a client approaches 65 we transition their portfolio into an appropriate 'retirement portfolio', with the appropriate asset allocation and regional allocation, working with the client to ensure that their retirement objectives have been achieved should they wish to retire at any moment."
With the knowledge that they are able to retire at any point if they want to do so, McCallum often sees a change in people's attitude to work and life.
Many clients will then reduce the number of hours that they work in a week, allowing them to spend more time with their families or on the golf course.
Often they will choose to do only the work they really enjoy, declining any undesirable work they would previously have taken on to boost their income.
"Besides the peace of mind of knowing that you can retire at any point should you wish to, we often find that those clients who choose to work on their own terms end up earning even more money than they did while conventionally employed.
"Work forms such an important part of some clients' lives, and it is often better for these clients to slowly reduce their working hours than retire 'cold turkey', which can lead to anxiety, boredom and even a loss of identity," says McCallum.
However, for some of his clients, particularly those "who have been stuck on a treadmill for too long", a complete break is sometimes necessary.
"We have clients to whom we have recommended that they take a three-month forced break from all work, allowing them to re-focus on what it is that they are looking for. Often, these individuals decide to take on new projects with great success after their sabbatical."
But most people won't have the luxury of deciding whether they want to scale down work.
It is the minority of South Africans who will be able to retire in the traditional sense, says Rowan Williams, private client adviser at Sasfin Financial Advisory Services.
South Africa is facing a massive retirement funding crisis, with only a fraction of households saving enough as almost 80% of disposable income is spent on debt repayments.
Prospective nevertirees should keep this in mind:
• Don't count on it
There is no guarantee that you will be able to work after retirement.
"In my opinion, you should not count on working beyond age 65 to save you financially - there are just too many unknowns," says McCallum.
"As we get older, there are the obvious health concerns as well as possibly lower energy levels and potentially lagging interest in the work. Again, everyone is different when it comes to this and while we do see 80-year-olds working at full tilt, this is the exception rather than the norm."
Also – your company may not be able to accommodate you, or there may be other factors (the health of your spouse) to consider.
Your financial planner should work with you to implement a plan that includes work until age 65, for example, and then possibly consider an alternative scenario where you could work for longer - but this should not be your primary financial plan.
• Save as if you will retire early
A risk nevertirees could face is that they may be tempted to put off saving for retirement now, based on the assumption that they will continue working forever, says McCallum.
"There is no substitute for having retirement capital accumulated which will give you the ability to make the choice of working or not."
Current thinking is that you need to put away at least 20% of your salary (for decades) to ensure a comfortable retirement.
• Don't take risks with your pension
It is a very dangerous game to use your hard-earned retirement capital to fund a new venture.
It could possibly fail, leaving you with nothing in retirement and little time to recover the loss.
"As we get older, it is important that capital is appropriately invested in a diversified investment strategy with a reduced risk of significant capital loss," says McCallum.
A certified financial planner will be able to assist you in considering the various scenarios that you may see for yourself, as well as the potential consequences of decisions you may be tempted to make, he adds.
The planner will also assist you in managing the income you may need to draw from your retirement capital to supplement possible earnings, as there are important tax and flexibility implications of drawing capital from unit trusts versus a living annuity, for example.
• Take care of estate and succession planning
Because they are continuing their careers, nevertirees may be lulled into a false security about the future.
Make sure that all your estate planning is up to date, that you have suitable medical cover and that – preferably – all your debt is paid off by the traditional retirement age.
While retirement was traditionally a time when individuals would make plans for their family's wealth, nevertirees are working well beyond the traditional retirement age and are in danger of leaving difficult decisions unresolved, says Nqweni.
"Even though many people may remain at work well into their later years, they should not shy away from succession planning. In many cases, a longer working life places even greater importance and urgency on the need for succession planning decisions to be made much sooner."
- Fin24
