As with anything in life, retirement has its own risks, the impact of which can be severe if not anticipated and planned for. Luckily, you can plan ahead and prepare for the worst of them.


Death is not something we like to talk about yet it is a reality for all of us some day. You need to know how your family, your dependants and beneficiaries will be affected financially should you die whilst still in the service of your employer. Your retirement fund also has a death benefit in place. The trustees will share out the benefit fairly among your dependants and beneficiaries if you die while you are still working for your employer and still a member of a retirement fund. You need to educate your dependants about what they can expect and what they should do in the event of your death.


A possible risk that we all face during our life time is that of becoming disabled, be it due to an accident or illness. The severity of the disability has various impacts on our personal and financial situations. In some cases, you might still be able to work in spite of a disability. Sometimes a disability is so severe that you would be unable to work anymore. You will still need some form of income to live on from day to day, which is why your retirement fund offers disability cover.

Retrenchment or change of employer

When you resign, or are retrenched or dismissed, the rules of your retirement fund will set out exactly what benefits you are entitled to. Speak to someone in your HR department about the amount you will receive.

Financial setbacks

Your long term savings are for retirement purposes. Short term savings are for emergency fund and short term investment objectives such as putting a deposit down on a house in 12 months time. Ideally, you should have an amount of at least three to six months’ salary saved in an emergency savings fund. This is money that should be used only in a financial emergency. One of the most important features of having an emergency savings fund is the fact that when you ever dip into it, it will not affect your long-term financial goals.


Your goal is to have a Net Replacement Ratio of 75% of your salary to replace your income when you retire. To get a better understanding of how much you should be saving for retirement, use the Retirement Projection Tool. This tool will help you determine if you are saving enough for retirement and will show you any shortfalls in your retirement savings and how you can work at fixing these so that you can realise your goal of a financially secure retirement.

Net Replacement Ratio (NRR) = Income after retirement / Income before retirement

NRR calculates the income you will get when you retire. It is shown as a percentage of the income that you get now.

The amount that you contribute to your retirement every month, as well as the investment returns on your savings, will affect your NRR.

Your NRR also depends on:

  • How much you save for retirement.
  • How long you save for retirement.
  • If you preserve your retirement savings.

Outliving your income

You could live longer than you think! And the longer you live, the more money you will need. With medicine always improving, people are living longer than before, so they need to save more money. Think about it this way: you could live for 30 years after retirement, which is almost as long as you have worked for, and you will need to have an income for those years!


Inflation is a measure of the constant increase in prices over time and is best described as how you can buy more with R1 today than you will be able to in the future. This means that inflation will lower the buying power of your pension money over time. It is important to invest your money in a way that allows it to grow in line with inflation.

Market Fluctuations

No one can predict the way the markets will perform. Investments go through up-swings, where you can earn an impressive return on your investment. Your investment can also be subject to the market’s down-swing and you can find yourself earning negative returns on your investments. Remember when making investment decisions that past performance is not an indicator of future performance and you should not try to time the markets.