A whopping 40% of working South Africans do not contribute to a pension or provident fund or a retirement annuity fund, and a third of working South Africans rely on the government to take care of them in their old age.

These alarming statistics were highlighted in the recent Old Mutual Savings and Investment Monitor.

Lynette Nicholson, Old Mutual's research manager, says the percentage of people who depend on the government - 32% - has not changed much in the past eight years.

The survey reveals that the percentage of working South Africans who contribute to pension and provident funds is around 50%, and this percentage has remained static since 2010. The percentage of South Africans who used retirement annuities over the past year is 27%, down from 30% the year prior.

Furthermore, one in three baby boomers - people born before 1965 - have no formal retirement fund savings, which means they have not contributed to a pension, provident or retirement annuity fund, she says.

South Africans are going to have to dig deep into their pockets to put away money for their retirement against the backdrop of a gloomy picture for the economy.

Even when the economy does improve in the future, "investment returns will be lower for the unforeseeable future and saving for increasing longevity will continue to be a challenge, meaning you need to save more", says Rian le Roux, Old Mutual Investment Group economic strategist.

He says the savings challenge facing South Africans is aggravated by the fact that many people retire too early. The average retirement age in South Africa is about 60, compared to the global norm of about 65,
he says.

He highlights a number of investment behaviour problems that impact negatively on South African investors' provision for retirement. When South Africans do save and invest, they tend to ignore the risks. Investors have a fixation with short-term market volatility, which leads to poor long-term investment decisions, and most have no savings goal and therefore no investment plan, he says.

How much to save

When you analyse your financial situation, ensure that you understand your future expenses, says Le Roux.

"Only three factors will determine how to get to the magic number of enough capital: how long you save for, how much you save and your investment return."

It is important to remember that you can control only one of these factors, and that is how much you save.

If the planning is daunting, get advice.

Derick Ferreira, the head of product management at Old Mutual Personal Finance, says research shows that clients who get advice can improve their retirement income by up to 31%, compared to those who do not use a professional financial adviser to determine how much capital they need at retirement, whether or not they are on track and - in the event that they are short - how to close the gap.