How much money you need to retire in South Africa

The average South African household needs over R7 million to comfortably retire. However, many only retire with around 60% of this target saved, forcing them to work into retirement. 

This is based on research done by Just South Africa, a retirement income and life annuity specialist that partners with asset managers to help South Africans retire comfortably. 

In the first few months of 2024, the company analysed retirement in South Africa to understand why many people cannot fully retire. 

The study showed that more than half of South Africans prefer to live for today than worry about retirement. 40% said that they had not been actively saving for retirement at all. 

Saving for retirement is a long-term financial strategy, and success hinges on generating real returns over time.

The main benefit of saving over a long period of time is the immense benefit of compound interest, which should do the heavy lifting for investors. 

This requires savers to begin early and consistently put money away for the future while not interrupting the compounding process unnecessarily. 

A key factor to consider before saving for retirement is how much you want to withdraw to live on in retirement, as this will influence how much you need to save when working. 

The study showed that to retire comfortably without placing unnecessary pressure on you to save, a retiree should aim to withdraw no more than 5% of their retirement capital. This is the amount they will take out of their retirement investments to live on. 

With this starting income level of 5% of retirement capital as your standard, you require a capital lump sum equal to 25 times your final salary to invest in an income-producing annuity on retirement.

This is the amount required to generate an income equal to 100% of your final salary post-retirement. 

Just South Africa calculated that, based on the average household income of R300,000 per annum, South Africans need over R7 million to retire sustainably. 

How to know you are on track

Ninety One’s Paul Hutchinson

Last year, Ninety One completed an in-depth study into how investors should approach saving for retirement. 

Commenting on the study, Paul Hutchinson from Ninety One emphasised that any delay in saving for retirement will negatively impact your current and future quality of life. 

The delay will force you to save more when working for retirement, reducing your current quality of life and limiting the amount of money you have in retirement. 

For example, if you begin saving at 20 years old for retirement, you only need to save 15% of your income to retire, with 20 times your final salary at 60. 

However, if you start saving a decade later, you need to save at least 30% of your income to retire at 60. 

If you start even later, at 40 years old, then you need to put away 60% of your income to be able to retire with 20 times your salary at 60. 

As critical as starting early is knowing whether you are on track to retire at your targeted age, Hutchinson said. 

This will enable you to invest more and change where your money is invested to ensure you can retire comfortably and not get a nasty surprise at the end of your working career. 

The following graph shows milestones you need to reach at particular ages that show you are on the path to a comfortable retirement. 

At 25, you should have saved at least one full annual salary. At 40, this should increase to five times your salary. At 50, you should have saved ten times your salary. 

This path will not hold for everyone as those who retire at 70, for example, might not require the entire amount of 20 times their income, as they would have worked for an additional three years and have fewer years remaining to spend their savings.


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