Here’s How Much Money You Need to Retire Comfortably

After asking a question, clients are often surprised by the answer. But before you get to Tuck’s answer, you need to understand that the key to the whole equation is time.

Knowing how much you need to save for retirement depends on how old you are. Now. This number is a starting point as it gives you an idea of ​​the time horizon you are working with and also indicates the appropriate risk profile for your investment.

Obviously, the earlier you start, the more you can benefit from the compounding growth of your investment. Assuming you’ve invested in the right product with a reputable investment manager, you can think of it like this:

Your monthly contributions + consistency + time = better chance of getting a good return on your investment.

Want to see what’s possible before you retire? 10X made it easy. Use one of the convenient calculators to calculate the amounts:

Finally, you need to keep in mind that the cost of your investments (that is, the fees you pay to your investment manager) can greatly affect your returns. A 1% difference in fees can mean the difference between a comfortable and stressful retirement. If you are unsure about your expenses, use 10X. Effective Annual Cost Calculator or get free cost comparison.

Three Rules of Thumb for Adequate Retirement Savings

It’s worth remembering that none of these formulas are guaranteed to help you retire well. They are based on what Tuck has seen over the years and are offered here only indicatively, as a sobering reminder to have realistic expectations about the income your retirement investments can provide you when you stop working.

1. Multiply your final annual salary by 15.

If, for example, your take-home salary is R25,000 per month in your last year of work, that would mean an annual salary of R300,000. To maintain your lifestyle after retirement, you will need approximately 15 times your annual salary, i.e. 15 x R300 000, which is a lump sum of approximately R4.5 million.

However, if you’re hoping to do something you didn’t do during your working years, such as travel or take up new hobbies, you’re better off multiplying your final salary by 17, or even 20 or more.

2. Set aside R1 million for every R5,000 you want to pay into your pension each month.

You can also get a rough idea of ​​how much money you’ll need to save in retirement by assuming you’ll need to invest R1 million in an annuity for every R5,000 a month you want to receive as income in retirement. (R5000 is a conservative and, more importantly, sustainable estimate to ensure you don’t eat into your investment capital.)

So, if you want to receive a monthly pension of R25 000 per month, you will need to save R5 million by the time you retire.

3. Multiply your monthly needs by 300.

One of the simplest calculations is to multiply the amount you think you’ll need per month (say R25 000) by 300 to determine the lump sum you’ll need to save (in this example R7.5 million). This option gives a slightly higher figure than the other two options, which is good.

After trying one of these calculations, you’ll probably say you should increase your savings. And you have to do it – we as a country are not saving enough. The majority of respondents (71%) of the survey used to compile 10x pension report indicated that they had no retirement savings plan at all or only a vague understanding of one. According to the South African Reserve Bank, the average South African spends 75% of their salary on debt servicing.

So what can you do to ensure you retire comfortably?

Talk to a pension specialist and make a plan together. Tuck and his team’s mission is to ensure you make the right decisions before you retire, and if you’d be better off somewhere else, they’ll tell you.

Other tips to help ensure you have the retirement you deserve include:

• Pay your future self first.. Don’t wait until the end of the month to save or invest. As soon as your salary arrives, invest some of the funds for retirement. This way, you can spend whatever you have left with a clear conscience. This small change can have huge, life-changing consequences.
• Have proper asset allocation in your investment portfolio. Diversification across all asset classes throughout your retirement journey will protect your wealth.
• As mentioned earlier, don’t pay high commissions. Work on investment management fees, as the longer you invest, the more they will work against you. Use 10X Effective Annual Cost Calculator or get free cost comparison if you are unsure about your fees or feel that your investment could benefit you more. Don’t finance someone else’s pension – take care of your own needs.

The truth is that as a country we are very good at sacrificing the long term in order to keep up with the Joneses. The money you’re currently spending on servicing your debt or spending on expenses you don’t need could be put toward your retirement plan or invested constructively elsewhere to keep you comfortable in your golden years. Start creating a retirement plan today and stick to it diligently. This is your future.

Any questions? You can speak directly with Tuck and his team about retirement planning, at no cost to you. Just contact us — 10X does not have call centers, only specialists ready to help.

This article is sponsored by 10X Investments.

^{The content here is provided as general information. It is not intended to and does not constitute financial, tax, legal, investment or other advice. 10X Investments is an authorized FSP (number 28250).. 10x living annuity guaranteed by Guardrisk Life Ltd.}