Who's responsible for your retirement?

Rethinking employer vs. personal retirement planning ownership

- By DEEPESH DESAI

FOR MANY South Africans, the idea of retirement has long been tied to a familiar belief that their company pension will take care of all their financial needs once they stop working.

It's a comforting thought, but it's outdated—and growing numbers of people are reaching retirement age, only to discover that what they've saved in their employer provided pension fund's plan isn't enough to support them for the rest of their lives.

This shortfall forces many prospective retirees to make tough decisions around working longer, selling assets, or having to rely on family.

The shift started years ago when companies moved away from defined benefit (DB) funds, where the employer carried the risk and guaranteed your payout when you retired, to defined contribution (DC) funds, where the payout depends on what you (and your employer) put in, and how well it's invested.

That means the responsibility for securing your retirement—and the risk of not doing so—now sits squarely with you.

Why relying only on your employer's pension plan is risky

If you're depending solely on your employer's retirement fund, it's worth stepping back and looking at the bigger picture. These plans aren't always flexible. If you change jobs, you could lose momentum in your savings.

Many employees have no clear idea of what their retirement payout will look like, and are shocked when they find out it falls short. Employer plans also tend to focus only on your retirement income, without factoring in other needs like tax planning, medical expenses, or leaving something behind for your family.

That's not to say that employer plans are bad—they are essential, and very valuable—but they simply aren't designed to carry the responsibility for your retirement on their own.

Rather take a blended approach