Most people under-estimate how long they will live after retirement, with disastrous financial consequences, says Citadel Investment Services deputy chairman Magnus Heystek.
Speaking at the Personal Finance/TMA Truth about Retirement seminars, Heystek said longevity in the western world had increased by 50 percent this century.
"At the turn of the century life expectancy for women was in the mid-50s and for men about 50 years. By the end of World War 2 life expectancy had increased to 65 and 59 years respectively while the current life expectancy is 75 for women and about 69 years for men.
"Anyone aged 40 today has a better than 70 percent chance of reaching the age of 65."
The increase in longevity creates financial problems for those who disregard the consequences, Heystek says.
"Most people underestimate the amount of capital they need."
The trend has been boosted by improvements in medical care, better nutrition and a growing realisation of the benefits of regular exercise, as well as the absence of world wars.
Most people would be shocked by the amount of money they need to retire, Heystek says.
Other changes on the retirement front, he says, include:
* The shift from defined benefit to defined contribution funds, which means that members of retirement funds would have to play a bigger role in the monitoring of the fund's investments;
* New pressures on trustees to deliver the goods for members;
* A more hostile tax environment - current taxes on retirement funds could cut annual growth of a defined contribution fund by about one percent a year; and
* A changing investment environment, with the opening up of compelling offshore opportunities and the mushrooming growth of the domestic unit trust industry.
Investments on stock markets in other countries, not only the United States but also in Europe and Australia, for instance, performed much better than on the Johannesburg Stock Exchange over the last 10 years.
"Yet many South African investors still regard offshore investments with a mixture of anxiety and curiosity... All South Africans need to review their overall investment portfolio, taking into consideration this new-found freedom to invest in any market, in any currency and in any fund in the world," Heystek says.
"This calls for drastic measures; in some cases this means the cancellation of existing investments in order to realign personal investment portfolios to get the appropriate offshore exposure.
"Viewed dispassionately, the maximum exposure to South African assets should not exceed one percent of total assets.
"This finding is based on the asset allocation models used internationally by fund managers who are guided by the Morgan Stanley World Capital Index which gives South Africa a weighting of around one percent in the world index," Heystek says.