How much money you need to retire in South Africa

South Africans must replace at least 75% of their final income at retirement age to retire comfortably. This means they should save anywhere from 12% to 17% of their income from the day they start working.

According to Allan Gray’s Twanji Kalula, one reason South Africans often miss the mark is that they do not really understand how much money they will need at retirement. 

Most personal finance experts suggest that you need to be able to replace at least 75% of your final income at retirement age to maintain a similar standard of living. 

This generally means that we should save around 12% to 17% of our income from the day we start working.

According to a retirement industry survey that explored the retirement saving habits of income-earning South Africans, the average South African retiree can replace just 31% of their income.

“In real terms, this means that after working for decades, most of us will be forced to live on less than a third of our preretirement income or face the very real risk of outliving our retirement nest egg,” he explained.

To illustrate this, if someone plans to retire at 65, and their salary pre-retirement is R100,000 per month, they will need to save enough money throughout their career to get R75,000 per month after retirement.

However, if they have only saved enough to afford to withdraw 31% of their final income per month after retirement, they will be forced to live off of R31,000 per month.

This is a tough ask if their lifestyle has been based around a R100,000 salary for years prior to retirement.

Kalula said the survey data also shows that just 9% of retirees are able to replace 80% or more of their income. 

These stats are supported by anecdotal feedback from independent financial advisers who say that 90% of their clients are unable to retire comfortably. 

“This means that many retirees will inevitably become reliant on the financial support of loved ones to make ends meet or have to find ways to continue generating an income,” he warned. 

The FNB Retirement Insights Survey for 2024 recently revealed that half of South Africans do not have a retirement plan, and even fewer will be able to retire comfortably. 

Many are working into retirement or relying on their children and the state after their careers end. 

The survey showed that South Africans’ inability to retire significantly burdens those around them and society. 

The 2024 survey sampled a broad South African demographic informed by FNB’s client base and is part of the bank’s efforts to manage a greater share of retirement funds. 

A major theme noticed by FNB is that recent economic conditions have significantly impacted South Africans’ retirement savings and finances. 

Only 40% of South African consumers feel secure about their finances, and there is a massive gap between higher-income South Africans and poorer consumers. 

Data from the survey shows that close to 50% of respondents are not planning for retirement, with economic challenges, high immediate financial obligations, and a resulting inability to save being some of the biggest barriers. 

These findings highlight a critical gap between the imperative for financial survival and the importance of long-term financial planning.

These poor outcomes are driven by South Africa’s ineffective retirement system, product head of FNB Wealth and Investments Samukelo Zwane said. 

The Mercer CFA Institute’s Global Pension Index ranked South Africa 38th out of 47 countries, with the country’s overall rating declining from 2023. 

South Africa’s rating dipped to 54 out of 100, receiving below-average ratings for adequacy and sustainability.