Concerningly, the 10X Investments Retirement Reality Report, published earlier this year, shows that little has changed in South Africans\u2019 approach to retirement saving, with many neglecting to do so.<\/p>\n\n\n\n
The report tracked and measured the lifestyles of 15.4 million economically active South Africans, revealing that most South Africans have still not formally planned for retirement.<\/p>\n\n\n\n
Even among those who have planned, there is a lack of confidence in their preparations for a comfortable retirement. <\/p>\n\n\n\n
Roughly half of the respondents with a retirement plan stated that their plans were likely on track, while 29% of individuals over the age of 50 admitted that they were not on track. <\/p>\n\n\n\n
What you need to save <\/strong><\/p>\n\n\n\n A comfortable retirement means different things to different people. <\/p>\n\n\n\n To some, it might mean regular travel; to others, prioritising time with family is their definition of a comfortable retirement.<\/p>\n\n\n\n However, retirees generally define \u2018comfortable\u2019 as having enough money to meet all their needs. <\/p>\n\n\n\n These needs include living in an ideal home, enjoying healthy food, and spending time with their family and friends. <\/p>\n\n\n\n The financial resources do more than provide material goods or plane tickets to exotic destinations. It acts as a cushion against uncertainty.<\/p>\n\n\n According to Marnus Mostert, a franchise principal and financial adviser, saving to draw 75% of your current salary will ensure a comfortable retirement.<\/p>\n\n\n\n Like many other experts, he stressed that the earlier you start saving, the easier it is to achieve your retirement goals. <\/p>\n\n\n\n To illustrate this, Mostert showed that one would have to save just under 12% of their gross monthly salary to achieve a 75% replacement ratio by age 65.<\/p>\n\n\n\n However, this jumps to almost 21% by age 35 and a whopping 40% by age 45\u2014which will be very hard to achieve for many South Africans.<\/p>\n\n\n\n These scenarios assume a current gross salary of R40,000 and a targeted retirement salary of R30,000 per month (75% of current) that will also increase by CPI (5.5%) until retirement at age 90.<\/p>\n\n\n\n It also assumes an investment growth rate of 10%.<\/p>\n\n\n\n The tables below show how much you need to save in your 20s, 30s, and 40s to retire comfortably in South Africa, as outlined by Mostert. <\/p>\n\n\n\n Mostert added that one should also consider increasing the premium by 10% per annum instead of 5.5% per annum. This allows you to start at a lower level when you might be earning less at a younger age.<\/p>\n\n\n\n Additionally, he advised that if you invest in retirement vehicles, you will be getting money back from SARS. <\/p>\n\n\n\n Try reinvesting the funds back into the fund; this will increase the investment come retirement and result in more tax being paid back to you\u2014rinse and repeat this cycle, he said.<\/p>\n\n\n\n General rule of thumb<\/strong><\/p>\n\n\n\n Ninety One provided a rough ‘rule of thumb’ for savings goals regardless of your salary.<\/p>\n\n\n\n If you begin saving for retirement at 20, you would only need to set aside 15% of your pre-tax salary for 40 years to retire with 20 times your salary at the age of 60. <\/p>\n\n\n\n If you start saving at 30, you would need to save 30% of your pre-tax salary every year to retire comfortably at 60. <\/p>\n\n\n\n If you start saving at 40, you would need to save an astounding 60% of your pre-tax salary to retire comfortably at 60.<\/p>\n\n\n\n The following graph shows milestones you need to reach at particular ages, showing you are on the path to a comfortable retirement.<\/p>\n\n\n\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/05\/Screenshot-2024-05-21-120733.png\")
<\/a><\/th> Age 25<\/th> Age 35<\/th><\/tr><\/thead> Retirement age<\/td> 65<\/td> 65<\/td><\/tr> Income goal at retirement (today\u2019s value)<\/td> R30 000<\/td> R30 000<\/td><\/tr> Investment yield %<\/td> 10<\/td> 10<\/td><\/tr> Lump sum at retirement<\/td> R48 549 225<\/td> R28 422 201<\/td><\/tr> Monthly savings required (increasing at 5.5% P.A)<\/td> R4 741<\/td> R8 182<\/td><\/tr> % of gross salary that needs to be invested <\/td> 11.85%<\/strong><\/td> 20.45%<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n <\/th> Age 45<\/th> Age 55<\/th><\/tr><\/thead> Retirement age<\/td> 65<\/td> 65<\/td><\/tr> Income goal at retirement (today\u2019s value)<\/td> R30 000<\/td> R30 000<\/td><\/tr> Investment yield %<\/td> 10<\/td> 10<\/td><\/tr> Lump sum at retirement<\/td> R16 639 225<\/td> R9 741 111<\/td><\/tr> Monthly savings required (increasing at 5.5% P.A)<\/td> R15 672<\/td> R39 470<\/td><\/tr> % of gross salary that needs to be invested <\/td> 39.18%<\/strong><\/td> 98.68%<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n