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It’s almost trite to repeat that the COVID-19 pandemic and its associated lockdowns have hit South African households hard.

Losing jobs and contracts and work hours came against a backdrop where many South Africans were already living from payslip to payslip. Not known for our thrift, only a fraction had rainy-day savings or other investments to fall back on. Desperate to stay ahead of the bills, or even just to put food on the tables or keep the lights on, one can imagine scenarios where individuals quickly dipped into the one safety net they had available: their retirement funds.

While it would be easy to say that this option should ever only be a last resort, for some it may be exactly that. But perhaps doing so can be avoided.

There are very real risks associated with drawing from one’s retirement savings ahead of retirement. Not least being that people may have much less money available for retirement, especially if that pension fund is likely to make up the bulk of their incomes. One Sanlam Survey found that over half of retirees do not save enough for retirement and so can’t make ends meet.

Consider, also, that for amounts above the once-off tax-free withdrawal threshold of R25,000, you would need to pay income tax on the money withdrawn. It becomes tempting, then, to take more out of the fund than is essential.

However, if at all possible, other options must be considered. The question is then, how can you manage your everyday finances with the confidence that you are balancing your immediate needs with longer-term security?

Here are a few things you can do:

  1. Understand your credit profile. If at risk, consider approaching creditors for flexibility on payment such as housing bonds, credit cards or even student debt. Many banks did offer this option over the lockdown, and there may still be some negotiating room. Sanlam provides free tools to help you understand your credit profile. You can easily determine where you need to make changes to reach your financial goals.
  2. You change every year. So should your financial plan. Speak to a financial adviser who can look over your full investment portfolio and guide you on the best options available to you.
  3. Avoid dipping into your retirement fund when changing jobs. If you can’t avoid this, once your income is restored, make up for the cash you’ve withdrawn from your retirement fund by saving more.
  4. Plan now for peace of mind later. Set a monthly budget to as a guideline for what you need to spend your money on. It’s never too late to establish healthy financial habits.
  5. Having the right support can get you through the unthinkable. The pandemic and its associated lockdowns have heightened not just financial but also psychological stress. Spending money on unnecessary items can be comforting – it is called ‘retail therapy’ for a reason. But understand these triggers and monitor your responses.

Whichever coping strategy you chose to overcome financial difficulty, remember, there are no shortcuts to anywhere worth going. Saving for retirement is a long-term objective, therefore, a long-term strategy is necessary.

And above all, start planning and saving for the next crisis. If nothing else, COVID-19 has proven that crises do occur, and a little planning will help you better weather the storm next time. It’s a natural human inclination to expect tomorrow and next week and next year to be the same as today – our brains seek consistency and reliable patterns. The past year will hopefully have taught us that this is not always going to be the case and that we need to plan.