Retirement planning is crucial to financial security, as it secures a comfortable and fulfilling post-work existence. It is the termination of full-time employment or the individual’s departure from the labour force (Nazimuddin et al. 2024). Retirement planning requires both psychological and financial preparedness (Nansubuga 2018). Psychological readiness involves developing a positive outlook, forming new habits and fostering social connections. At the same time, financial preparedness entails having sufficient savings and investments to maintain a desired lifestyle during retirement (Riitsalu et al. 2024).

Retirement planning in South Africa encounters considerable obstacles. A significant segment of economically active South Africans found it challenging to accumulate sufficient retirement savings to maintain their preferred standard of living after retirement (10x Investments 2023). The 10x Investments (2023) reported that 67% of economically active South Africans are poorly prepared for retirement, either by not having a plan (46%) or having a vague plan (21%). In addition, 62% are concerned they will not have enough retirement funds. Furthermore, merely 6% of economically active South Africans are anticipated to retire comfortably (National Treasury 2022). South African occupational retirement funds are mandatory, with contributions from both employers and employees. In contrast, SEIs frequently contend with fluctuating earnings, limited access to formal retirement savings options and the sole responsibility for their financial security. This distinct set of conditions necessitates a comprehensive understanding of their retirement planning practices and the challenges they face in developing effective support mechanisms and policies to enhance their financial wellbeing in retirement.

Research on retirement planning among SEIs in South Africa has been scarce. Research has investigated individuals’ preparedness or beliefs regarding retirement, frequently concentrating on specific demographics such as dentists (Snyman et al. 2017), Dutch Reformed ministers (Alsemgeest 2018) and soccer players (Maseko & Surujlala 2011). International research in Canada highlights the difficulties faced by SEIs, notably reduced savings rates despite financial prudence (Rostamkalaei et al. 2022). In Ghana, retirement planning focuses on securing future wellbeing through diverse economic and non-economic investments (Oteng, Manful & Akuoko 2024). Another study conducted in Ghana investigated both the specific financial planning instruments adopted by the self-employed workforce for retirement and the primary motivational drivers behind their pension-saving behaviours (Ofori 2021). A quantitative study in Malaysia demonstrated that financial attitude and literacy strongly influence retirement planning among SEIs, with financial advisers moderating these relationships (Mustafa et al. 2025). Nonetheless, these studies may not adequately reflect the distinct experiences of SEIs within the varied South African settings. Moreover, current South African research often focuses on specific professions (Alsemgeest 2018; Maseko & Surujlala 2011; Snyman et al. 2017) and/or general working populations or specific demographic and geographical areas (Krüger et al. 2020), thereby neglecting the numerous demands and issues faced by SEIs across various sectors.

This study utilises behavioural economics to analyse the retirement planning practices of SEIs in South Africa. Behavioural economics highlights the psychological factors that influence individual decision-making, including present bias, loss aversion, and overconfidence (Thaler & Sunstein 2008). Present bias refers to the tendency to prioritise immediate satisfaction over long-term benefits. Present bias in retirement planning can cause individuals to prioritise their current expenses over retirement savings, even when they are aware of the long-term consequences. While the benefits of retirement savings may be far off and less obvious, the pain of saving is felt immediately (Thaler & Sunstein 2008). The tendency for people to experience the distress of a loss more intensely than the joy of an equivalent gain is known as loss aversion. Loss aversion can manifest in various ways in retirement planning. For instance, people may be reluctant to invest in assets with a larger risk but also a higher potential return because they fear losing their money. They may hesitate to change their investment plan because of the perceived danger of underperforming their existing investment, even if a new approach offers greater long-term prospects (Kahneman & Tversky 1979). The propensity to overestimate one’s skills, expertise and influence over circumstances is known as overconfidence. Overconfidence in retirement planning may lead individuals to believe they will have sufficient time to save later, that they can outperform the market without adequate knowledge, or that they will live shorter lives than the average person; thus, they require less savings. This may lead to inadequate planning and savings (Malmendier & Tate 2005).

Save More Tomorrow™, an application of behavioural economics to retirement planning, was developed by Thaler and Benartzi (2004). This study examined how phrasing decisions might significantly increase retirement savings plan participation and contribution rates in a manner that reduces present bias and loss aversion. This initiative suggested that workers pledge to increase their savings rates in the future in tandem with pay raises. This strategy utilises the notion that people are more willing to make future sacrifices than present ones.

Behavioural economics elucidates the challenges several SEIs face in South Africa regarding retirement planning. Their emphasis on immediate financial objectives and reluctance to embrace risk may result in postponed or insufficient savings. Moreover, excessive confidence in their income-generating capabilities may cause individuals to undervalue the importance of retirement planning (Kahneman & Tversky 1979; Malmendier & Tate 2005; Thaler & Sunstein 2008). Utilising behavioural economics to examine retirement planning among SEIs in South Africa allows for a comprehensive understanding of the determinants affecting their decision-making and the formulation of more effective interventions to enhance their financial wellbeing (Thaler & Sunstein 2008).

The primary method employed for analysing the interview data was thematic analysis. This method entails recognising, examining and analysing persistent themes present in the data (Braun & Clarke 2006). Thematic analysis is especially effective for qualitative data, facilitating a profound comprehension of the underlying meanings and motivations that shape participants’ responses.

The data analysis process adhered to the seven phases described by Struwig and Stead (2013) and Marshall and Rossman (2016):

The College of Business and Economics Research Ethics Committee (CBEREC) of the University of Johannesburg granted approval to conduct the semi-structured interviews with the participants. The ethics approval number is 24SOM03. Ethical considerations were meticulously evaluated during the research process. Participants were informed of the study’s aims, benefits and participation advantages. All participants provided informed consent by reading and signing a consent form. Written informed consent was obtained from all participants involved in the study. Participants’ confidentiality was ensured and preserved throughout the study. Participant data were anonymised, with references made solely to participant numbers, and all personally identifiable information was removed. All procedures performed in the study followed the ethical standards of the institutional research committee.

Many SEIs exhibited a proactive approach by initiating early planning, saving and setting retirement goals. This corresponds with the established principle of early retirement planning, which is to capitalise on the advantages of compound interest (Lusardi & Mitchell 2014). Lusardi and Mitchell (2014) assert that early planning facilitates enhanced wealth accumulation over time. The study revealed variations in proactivity, suggesting that financial literacy and access to credible information are crucial in shaping retirement planning behaviours. The study’s findings align with existing research, which suggests that while financial knowledge was comparable between SEIs and salaried workers, the SEIs engaged in fewer financial behaviours that promote long-term financial wellbeing (Rostamkalaei et al. 2022). Similarly, in the US, SEIs reportedly participate in tax-advantaged retirement plans at a lower rate than wage earners (Joulfaian 2018). This underscores the fact that although the fundamental principle of early planning is acknowledged, its execution significantly differs among this group.

Financial literacy is essential for effective retirement planning (Boisclair, Lusardi & Michaud 2017). The diverse income allocation tactics noted, with some utilising structured budgeting and others focusing on immediate needs, highlight the need for financial literacy (Hastings et al. 2013) and access to suitable financial planning resources. Nazimuddin et al. (2024) found that financial skills and strategies have a significant impact on the savings behaviour of SEIs. Individuals with higher financial literacy are more likely to engage in robust retirement planning, and establishing a savings plan is a proven strategy for building wealth (Van Rooij, Lusardi & Alessie 2012). Existing studies have shown that financial attitudes and literacy significantly influence retirement planning (Lusardi & Mitchell 2011; Van Rooij et al. 2012). This highlights the need for targeted financial education and awareness programmes tailored to specific segments of the self-employed population in South Africa (Dhlembeu, Kekana & Mvita 2022).

While the interview questions did not directly use the terminology of behavioural economics, an analysis of the SEIs’ descriptions of their decision-making process reveals several instances that align closely with the concepts of present bias. Individuals tend to assign greater value to immediate rewards compared to future ones, a concept crucial for understanding inadequate saving behaviour (Thaler & Sunstein 2008). Participants predominantly favoured the immediate, concrete advantages of addressing business expenses and family obligations over the more abstract, long-term objective of retirement savings. O’Donoghue and Rabin (1999) illustrate how this tendency can lead to inefficient decision-making, particularly in scenarios involving deferred benefits, such as retirement funds. This inclination toward short-term gratification is a substantial obstacle to long-term financial planning, ultimately diminishing retirement wealth (Goda et al. 2019). The present bias is particularly relevant for SEIs because of their variable incomes and urgent business requirements. This suggests that SEI retirement planning challenges are not solely because of financial illiteracy or income constraints, but are fundamentally linked to a behavioural tendency to over-discount the future. This finding supports the theoretical integration of behavioural economics into this study. Consequently, financial education programmes should be developed to help SEIs mitigate these behavioural biases and understand the long-term implications of their financial decisions (Thaler & Benartzi 2004).

Retirement planning for the SEIs requires a sequence of deliberate decisions that depend on both comprehensive knowledge of available alternatives and the ability to accurately estimate the potential outcomes and associated probabilities of each option (Rostamkalaei et al. 2022). Self-employed individuals exhibited differing levels of acquaintance with traditional retirement planning instruments, including tax-free savings accounts and retirement annuities. Significantly, more inventive instruments were recognised, indicating a readiness to investigate various alternatives. This propensity for diversification and management of retirement results corresponds with broader trends recognised by Lusardi and Mitchell (2014). They contend that individuals are increasingly seeking enhanced autonomy and flexibility in their retirement planning, departing from conventional, uniform approaches. The findings of this study corroborate this pattern among the self-employed demographic, who frequently prioritise autonomy and control in their professional endeavours, extending this inclination to their financial planning.

Despite the prevalent belief that SEIs are less inclined to pursue external support, most SEIs in this study actively sought professional guidance for their retirement planning. Working with an adviser is correlated with improved financial planning, encompassing retirement preparation and crisis response (Marsden, Zick & Mayer 2011). This highlights the importance of acknowledging the challenges involved in retirement planning, particularly for those with inconsistent income sources and distinct financial situations. The counsel of an informed adviser is essential in navigating these intricacies, and utilising an adviser demonstrably enhances retirement income, resulting in substantially higher sustainable spending (Harlow, Brown & Jenks 2020). Additionally, participants displayed differing degrees of confidence concerning their financial readiness for retirement. Some individuals proactively evaluated their needs and created financial strategies, while others recognised the gaps between their existing resources and their aspirational retirement lifestyle. A common issue was the impact of inflation on retirement savings, underscoring the need for long-term planning and prudent investment choices. This highlights the importance of financial knowledge and access to professional counsel for SEIs in effectively managing their retirement resources amid economic volatility (Harlow et al. 2020).

Several SEIs favour a self-directed retirement strategy to maximise personal autonomy, revealing a distinct disparity between subjective confidence and objective preparedness, which aligns with the behavioural principle of overconfidence (Chen et al. 2024). This bias manifests as an overestimation of both financial knowledge and retirement preparation. For example, some individuals display only a superficial understanding of financial products (e.g. merely naming a tax-free savings fund) yet feel competent enough to manage their retirement without professional assistance. The study also identified significant discrepancies in financial preparedness. Existing research suggests that consumers who are overconfident in their financial knowledge are less likely to engage in consistent retirement planning, specifically by making regular contributions to retirement accounts (Chen et al. 2024). Individuals often perceive themselves as ready without having comprehensively assessed their actual financial requirements.

Examining the obstacles to retirement planning for SEIs identified financial constraints, conflicting priorities and a lack of self-discipline. Research highlights that the SEIs face a greater degree of agency and cognitive demand in structuring their retirement security (Rostamkalaei et al. 2022). Inadequate self-discipline impedes SEIs from sustaining regular retirement savings. The lack of external mechanisms, such as compulsory payments via employment, underscores the significance of self-discipline and regular financial practices for this demographic. Successful planning for this cohort requires a deliberate decision to save. The erratic income associated with self-employment poses significant challenges in sustaining regular retirement savings. Self-employed individuals often experience a gap between their stated intention to plan for retirement and their actual ability to save for retirement. This constraint stems from the illiquidity of business wealth, combined with the unpredictable nature of cash flows, which hinders the regular diversion of disposable income toward dedicated retirement vehicles (Rostamkalaei et al. 2022).

Self-employed individuals expressed concerns regarding the rigid structure of retirement annuities, particularly their limited accessibility during times of financial distress. The psychological impact of this illiquidity drives decision-making: SEIs prioritise the immediate and powerful fear of losing access to their capital over the tax-advantaged benefits of the annuity. For SEIs, the fear of this perceived risk of loss in a future financial emergency acts as a powerful psychological barrier, causing them to prefer less formal, more liquid savings vehicles. To address this barrier, efforts to overcome this inertia and risk aversion should focus on simplifying choice architecture and facilitating access to robust retirement planning tools and services (Madrian & Shea 2001). The introduction of the two-pot system (Republic of South Africa, 2024), which allows for pre-retirement fund access, provides compelling policy validation for this finding. Although legislation amendments postdate this study, the two-pot system explicitly addresses flexibility. It is likely to resonate more strongly with SEIs, potentially mitigating their historical preference for non-retirement savings.

Participants emphasised the challenge of reconciling retirement planning with other urgent financial priorities. Self-employed individuals frequently prioritise allocating business profits toward capital expenditures or working capital over contributing those funds to personal retirement savings (Rostamkalaei et al. 2022). Prioritising ongoing business operations and meeting urgent financial obligations frequently overshadowed long-term retirement savings. This discovery highlights the susceptibility of SEIs with inconsistent income to choose quick gains above long-term financial security, illustrating the previously mentioned concern of present bias. A reduced emphasis on immediate gratification over future benefits is a meaningful determinant of retirement savings accumulation (Goda et al. 2019).

Self-employed individuals expressed varied viewpoints regarding their retirement objectives, with some seeking to maintain a quality of life similar to that of their pre-retirement years. In contrast, others emphasised self-sufficiency through ongoing entrepreneurial activities. The findings indicate that SEIs in South Africa frequently anticipate a retirement that includes continued engagement in business activities.

A notable finding was the widespread distrust in financial institutions, shaped by apprehensions regarding future economic uncertainties, adverse media portrayals of financial scandals, and individual experiences of perceived mismanagement. Ricci and Caratelli (2017) sought to understand how the level of confidence in financial institutions impacts investors’ choices and determined that financial knowledge and trust are essential drivers of retirement planning, necessitating policy action to promote increases in both variables among the citizenry. The absence of trust presents a considerable obstacle to effective retirement planning, potentially dissuading individuals from engaging with traditional retirement savings options. The lack of confidence is consistent with extensive research on trust in financial institutions, indicating that negative perceptions can significantly affect individuals’ readiness to utilise formal financial products and services (Guiso 2008; Ricci & Caratelli 2017). Guiso (2008) asserts that trust is essential for financial participation, which may result in suboptimal financial decisions. All participants recognised the significance of retirement planning; however, their perspectives varied in emphasis and approach. Numerous individuals emphasised the importance of financial security and independence during retirement, acknowledging the need for self-reliance without relying on occupational retirement funds. Some individuals expressed dissatisfaction with conventional retirement planning methods, indicating a preference for alternative strategies, such as establishing self-sustaining businesses. This underscores the notion that traditional retirement models may not adequately align with the self-employed demographic, which typically values control and flexibility in financial planning.

In summary, the findings predominantly validate the existing literature on retirement planning for SEIs, underscoring the importance of early planning, consistent savings, consulting a financial adviser (Mustafa et al. 2025) and reducing present bias (Thaler & Benartzi 2004), while offering context-specific insights relevant to South Africa.

The research offers an in-depth analysis of retirement planning obstacles and behaviours among SEIs in South Africa, providing significant insights for policymakers and financial institutions. However, the study’s focus on middle-income individuals and its cross-sectional design limit its generalisability and capacity to monitor temporal changes. The postdate implementation of the two-pot system analysis limits the evaluation of this policy’s direct influence on retirement planning behaviours. Subsequent research ought to rectify these shortcomings by incorporating a more extensive sample, utilising a longitudinal design and investigating the effects of the two-pot system. This will enhance the awareness of retirement planning difficulties and opportunities for SEIs in South Africa.

The findings underscore the critical need for integrated support systems that enable SEIs to balance immediate business demands with long-term retirement objectives. Specialised financial education is essential to address the observed variability in financial literacy and planning initiatives among SEIs. These programmes must be customised to the unique challenges of SEIs, focusing on managing variable revenues, comprehending retirement options and alleviating present bias by demonstrating the efficacy of early planning and compound interest. Beyond general education, support must include encouragement and facilitated access to affordable, professional financial advice. This professional guidance can help SEIs align tax-advantaged retirement contributions with business expansion goals. Addressing these needs requires collaboration among financial institutions, government organisations and educational entities to ensure that resources and professional services are accessible and relevant to the SEI community.

Self-employed individuals’ concerns about the rigidity of conventional retirement annuities highlight the need for more adaptable and accessible retirement savings solutions. Policymakers and financial institutions should investigate innovative products that enhance liquidity and adaptability to the variable income streams of SEIs. Subsequently, a study examining the two-pot system’s ability to meet flexibility requirements is warranted.