Retirement funding adequacy in black South African townships

Abstract

PurposeThis study investigates the retirement funding adequacy of black South Africans and how it can be influenced by family structure, health status, financial literacy and the role of the financial planner.Design/methodology/approachA mixed sampling approach was applied to collect data from 441 black South Africans. An exploratory factor analysis (EFA) was undertaken and Cronbach's alphas were calculated to confirm the validity and reliability of the measuring instrument. Structural equation modeling was the main statistical procedure applied to test the hypothesised relationships in the research.FindingsMost of the respondents reside in informal urban areas or townships. The findings show a significant positive relationship between financial literacy and the retirement funding adequacy of black individuals. The study found that individuals who are concerned about the wellness of their family, health and finances are more likely to maintain their standard of living at retirement. However, the role of the financial planner, among black South Africans, does not influence their retirement funding adequacy.Practical implicationsBlack South Africans are attentive to the wellness of their family, health and finances despite the necessity to support nuclear and extended family members. Financial institutions need to consider this aspect when providing financial advice to individuals who have many financial dependents.Originality/valueThis study contributes to the limited understanding on the factors that influence the retirement funding adequacy of black South Africans and it provides recommendations on improving retirement funding adequacy.

Perceptions of retirement savings: Through the lens of Black amaXhosa women in South Africa

“…As saving decisions can often be quite complicated, acquiring the services of a financial planner can help individuals navigate this situation because the financial planner has experience and knowledge in retirement savings (Lusardi & Mitchell, 2007). A financial planner is able to understand the individuals' needs and combine this with an expert's understanding of inflation and time value of money, in order to provide clients with suitable financial advice (Zeka, 2020). Financial planners are also able to manage an irregular income in a way that ensures that their client has sufficient savings for retirement (Zeka, 2020).…”

“…A financial planner is able to understand the individuals' needs and combine this with an expert's understanding of inflation and time value of money, in order to provide clients with suitable financial advice (Zeka, 2020). Financial planners are also able to manage an irregular income in a way that ensures that their client has sufficient savings for retirement (Zeka, 2020).…”

“…However, in a study conducted by Zeka (2020) on Black individuals residing in South Africa, it was found that access to a financial planner was limited. Zeka (2020) explains this deficiency as being due to the inability of low income earning individuals, who reside in townships, to acquire the services of a financial planner.…”

“…However, in a study conducted by Zeka (2020) on Black individuals residing in South Africa, it was found that access to a financial planner was limited. Zeka (2020) explains this deficiency as being due to the inability of low income earning individuals, who reside in townships, to acquire the services of a financial planner. Thus, the research respondents would not have had access to a financial planner's services and, therefore, could not have adequately assessed the impact of such services (Zeka, 2020).…”

“…Zeka (2020) explains this deficiency as being due to the inability of low income earning individuals, who reside in townships, to acquire the services of a financial planner. Thus, the research respondents would not have had access to a financial planner's services and, therefore, could not have adequately assessed the impact of such services (Zeka, 2020). Despite this problem, Zeka (2020), believes that the inclusion of a financial planner's expertise is key to increasing retirement savings.…”