2016 | 01www.stanlib.com

STANLIB is an Authorised Financial Services Provider

BETH IS A 52-YEAR OLD WORKING MOTHER OF THREE WHO ALSO SUPPORTS HER AILING MOTHER LIVING IN BLOEMFONTEIN. She makes frequent trips from Johannesburg to Bloemfontein to take her mother to the doctor. While she is out of town, she employs an au pair to care for her children. Beth is just one of the more than 20% of South Africans falling into the “sandwich generation”, a generation supporting both their children (often young adults) and elderly parents. Beth is faced with the responsibility of managing her finances so that she can support herself, her children and parent, not only for the interim but also into her own retirement.

It is difficult enough to juggle three balls being you, your children and career, once the care giving ball is added, inevitably the ball getting

dropped is “you.” This scenario is prevalent with men and women choosing to have children later in life while their parents are living longer, contributing to this sandwich generation phenomenon. The sandwich generation age group tends to fall between 40 and 65 years.

According to the Old Mutual Savings Monitor, statistics show that 70% of South Africans aged 18 to 24 live at home. However, the shocking number for those who still live at home between the ages of 25 to 34 is 45%.

In the current volatile economic climate, those squeezed into the sandwich generation face the challenge of dipping into their retirement savings and often as a result of not having any disposable income. The new middle class is required to set aside part of their finances for their family needs which means

there is little or no saving for retirement. Without savings, there is a risk that the sandwich phenomenon will pass to the next generation.

The old adage, "charity begins at home", reminds us that we cannot help someone else if we do not look after ourselves first.

IF YOU ARE LIKE BETH WHAT CAN YOU DO TO EASE THE FINANCIAL SQUEEZE OF BEING A SANDWICH GENERATIONAL?1. Do not tap into your retire-

ment savings no matter how tempting it may be. For example, instead of diving into your savings pool to pay for your son’s new car or university degree, you should investigate finance options for young people. This will encourage him to be more responsible with his finances.

2. Plan ahead, no matter what your income is. Those who plan ahead manage

ARE YOUR DEPENDENTS ERODING YOUR RETIREMENT SAVINGS?

Cost of delay:

R1 112 942

Cost of delay:

R1 223 847

Source: STANLIB

R 1 264 816

R 452 098

Cost of delay:

R812 718

R 151 874R 40 969

THE COST OF DELAYING YOUR RETIREMENT SAVINGS

Accumulated values of investment at age 55

25 35 45 55Age start investing

R 300 000

R 600 000

R 900 000

R 1 200 000

BY LEVASHNI NAICKER, TECHNICAL AND CREATIVE MARKETING MANAGER, STANLIB

If an investor has excess funds and wishes to supplement their retirement savings, they may invest in other vehicles such as unit trusts.

2016 | 02www.stanlib.com

STANLIB is an Authorised Financial Services Provider

to save more and manage debt better than those who do not plan. By enlisting a financial adviser to help you manage your money, and know when to cut expenses and how to pay off debt.

3. Understand yourself as an investor. By knowing your emotions, fears and tolerance for risk, you can choose investments that are right for you and that match your long-term goals. What is your current net worth, monthly income and expenses? A financial adviser can help with a financial needs analysis, which will help you to identi-fy your short and long-term goals.

4. Think about investing for the long-term. It is important for you to have the patience to ride out market cycles and hold onto your investments through up and down cycles. Market fluctuations are inevitable. All you need to do is review your financial planning periodically and whenever your needs or circumstances change. Over the long-term you will benefit from the powerful effect of compounding returns.

5. It is important for you to stay on track by reviewing your portfolio at least once

a year, especially when your personal circumstances change.

6. You should aim to stay ahead of inflation. General-ly, you will need 80% of your current annual income in retirement. Retirees spend more on eating out, travel and entertainment in the early stages of retirement when they have the good health to better enjoy these activities. However, in the later years their health care costs can spike. It is a common misconcep-tion that medical aid will cover these expenses in retirement, which is simply untrue. The average net employee and employer retirement saving con-tribution in South Africa is around 10% of salary. Employees should consider increasing their monthly retirement fund contribu-tion and maintaining this premium for the long-term, ideally 35 to 40 years.

HOW TO STAY ON TRACK OF YOUR RETIREMENT GOALS It is fair to say that if the sandwich generation is facing cash flow problems now, there is a possibility this will follow through into their retirement. Increasing pension fund contributions to the maximum

tax-deductible limits of 7.5% for employee contribution and 20% for employer contribution in a pension fund, provides the most cost and tax-efficient options, before considering other forms of retirement savings. If an investor has excess funds and wishes to supplement their retirement savings, they may invest in other vehicles such as unit trusts.

WHAT INFORMATION CAN YOUR RETIREMENT FUND PROVIDE YOU WITH? The following information can be obtained from your retirement fund to assist in managing your retirement better:

• An annual death benefit needs analysis which alerts you to any shortfall in your death, disability or other benefits so that you may buy additional risk assurance if required.

• An annual projection statement indicating whether you are on track for retirement or if you need to postpone your retirement and make additional contributions to stay on course.

• An analysis of what your expected pension will be, long before your retirement

date. This will give you the opportunity to reassess your savings.

• You should also be advised if your investment option is no longer right for you. For example, you may be invested in a high equity portfolio while close to retirement.

It is clear that being stuck in the sandwich generation is no joke, however if you keep the simple principles of saving in mind and actively manage your needs over time, there is a way to ease the financial squeeze and stay afloat.

The sandwich generation is the generation of middle-aged individuals who are pressured to support both aging parents and growing children. The sandwich generation is named so because they are effectively "sandwiched" between the obligation to care for their aging parents - who may be ill, unable to perform various tasks or in need of financial support – and children, who require financial, physical and emotional support. The trends of increasing lifespans and having children at an older age have contributed to the sandwich generation phenomenon.

WHAT IS THE SANDWICH GENERATION?