{"id":155727,"date":"2017-02-20T19:00:26","date_gmt":"2017-02-20T17:00:26","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=155727"},"modified":"2017-02-20T18:19:50","modified_gmt":"2017-02-20T16:19:50","slug":"how-much-you-would-need-to-save-every-month-to-retire-a-millionaire-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/wealth\/155727\/how-much-you-would-need-to-save-every-month-to-retire-a-millionaire-in-south-africa\/","title":{"rendered":"How much you would need to save every month to retire a millionaire in South Africa"},"content":{"rendered":"<p>One of the biggest concerns facing South African households today is saving up enough money for retirement.<\/p>\n<p>While we tend to contribute towards a retirement annuity and\/or pension plan every month, it can often fall to the back of our minds before becoming a serious factor as we near retirement age.<\/p>\n<p>With\u00a0South Africans\u00a0now living longer it has also become\u00a0harder to determine &#8220;how much is enough&#8221; to retire.<\/p>\n<p>With that in mind, BusinessTech approached several prominent financial analysts to determine how much we would need to save &#8211; at various ages &#8211; to retire a millionaire at 65 in South Africa.<\/p>\n<p>The calculations\u00a0specifically focus on savings, as\u00a0it can be an immensely\u00a0difficult task to calculate RAs\u00a0and pension plans due to their personalised and\u00a0complex\u00a0nature.<\/p>\n<p>The calculations are also not intended to act as financial advice, but rather to illustrate the importance of saving as soon as possible.<\/p>\n<p>As noted by\u00a0Jaco van Tonder, director of advisory Services at Investec Asset Management, the rudimentary calculation is based on\u00a0<strong>the monthly contribution needed\u00a0to arrive at a capital lump sum of R1 million (in today\u2019s money terms)\u00a0at age 65<\/strong>.<\/p>\n<p><strong>Key assumptions:<\/strong><strong>\u00a0<\/strong><\/p>\n<ul>\n<li><strong>General Inflation:<\/strong> 6%.<\/li>\n<\/ul>\n<ul>\n<li><strong>Effective capital gains tax (CGT) rate:<\/strong> We used\u00a0the current effective CGT rate for an individual in the top income tax bracket \u2013 16.4%. Since this is a long-term investment it is assumed that the part of the investment return that would attract income tax (interest and property rental income) would be negligible. So the entire investment return was taxed at the effective CGT rate only.<\/li>\n<\/ul>\n<ul>\n<li><strong>Investment return:<\/strong>\u00a0We assumed a long-term investment return of 11% pa \u2013 if you deduct the 6% inflation assumption, this comes to a real investment return of 5% pa, which is what one can expect from an investment portfolio with at least 80% or more in equities.<\/li>\n<\/ul>\n<ul>\n<li><strong>Investment term:<\/strong>\u00a0We looked at people starting to save at various age brackets from age 25 to age 50, assuming that they continue to pay the required premium until they are age 65.<\/li>\n<\/ul>\n<ul>\n<li><strong>Regular contribution\/premium:<\/strong>\u00a0We assumed that the investor would be increasing the size of their regular contribution every 12 months in line with the inflation assumption above. This is important, and probably the most realistic assumption, as most people experience a steady inflation increasing salary, enabling them to increase the size of their monthly contribution to the investment annually.<\/li>\n<\/ul>\n<div class=\"bt_table\">\n<div class=\"table-responsive\"><table class=\"table\" width=\"100%\" cellspacing=\"0\" cellpadding=\"6\">\n<tbody>\n<tr>\n<th style=\"text-align: center;\" bgcolor=\"#CCCCCC\" width=\"50%\"><strong>Age at which investor starts saving<\/strong><\/th>\n<th style=\"text-align: center;\" bgcolor=\"#CCCCCC\" width=\"50%\"><strong>Required starting monthly contribution\u00a0<\/strong><\/th>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">20<\/td>\n<td style=\"text-align: center;\">R921<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">25<\/td>\n<td style=\"text-align: center;\">R1 131<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">30<\/td>\n<td style=\"text-align: center;\">R1 408<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">35<\/td>\n<td style=\"text-align: center;\">R1 786<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">40<\/td>\n<td style=\"text-align: center;\">R2 326<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">45<\/td>\n<td style=\"text-align: center;\">R3 152<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\">50<\/td>\n<td style=\"text-align: center;\">R4 546<\/td>\n<\/tr>\n<\/tbody>\n<\/table><\/div>\n<h3 class=\"my-4\"><strong>Is R1 million enough to retire on?<\/strong><\/h3>\n<p>While R1 million is a nice round number to work with, it is unlikely to be anywhere near enough to retire on, said\u00a0Lucienne Fild, an independent communications consultant for both the\u00a0Association for Savings and Investment South Africa (ASISA) and the Actuarial Society of South Africa.<\/p>\n<p>He cited\u00a0Peter Doyle, former president of the Actuarial Society of South Africa, who followed actuarial models to show that a good rule of thumb is that <strong>12 times your annual salary<\/strong> is likely to buy you a financially comfortable retirement.<\/p>\n<p>This is assuming that you are debt free by the time you retire.<\/p>\n<p>However, Doyle also noted that if \u00a0you need to financially support your spouse in retirement, you need to work on a <strong>multiple of at least 15<\/strong>.<\/p>\n<p><strong>Read:\u00a0<a href=\"https:\/\/businesstech.co.za\/news\/wealth\/154923\/how-much-you-would-get-if-south-africas-richest-men-gave-their-all-money-away-today\/\" target=\"_blank\">How much you would get if South Africa\u2019s richest men gave all their money away today<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>BusinessTech and top financial analysts have calculated how much a South African in their 20&#8217;s, 30&#8217;s, 40&#8217;s and 50&#8217;s will need to save every month in order to retire a millionaire at 65 in South Africa.<\/p>\n","protected":false},"author":10,"featured_media":101676,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9880],"tags":[26,1498],"class_list":["post-155727","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-wealth","tag-headline","tag-investec"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/155727","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=155727"}],"version-history":[{"count":21,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/155727\/revisions"}],"predecessor-version":[{"id":158947,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/155727\/revisions\/158947"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/101676"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=155727"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=155727"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=155727"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}