The average South African spends 75% of his or her paycheque on debt servicing, according to the South African Reserve Bank (SARB). This raises the question of how many of us are saving for retirement in South Africa if we are spending the majority of our income on debt and using the remainder to pay for necessities.
Based on the annual Brand Atlas Survey, which tracks the lifestyles of the 15 million economically active South Africans in households earning more than R8,000 per month, the 10X Retirement Reality Report was recently released. 71% of survey participants said they either had no retirement savings strategy at all or only had a hazy understanding of one.
So how much does retirement actually cost, and how can you start a savings strategy to get there?
There are three “old school” methods to “guesstimate” how much you would need for retirement, according to retirement expert Andre Tuck from 10x Investments.
1: Multiply your most recent annual pay by 15
“Let’s say your take-home pay in your final year of employment is R25,000 per month, giving you an annual income of R300,000,” said Tuck. “You’ll need a lump payment of about R4.5 million to sustain your lifestyle after retirement, or about 15 times your yearly wage, or R300,000.”
2: Put aside R1 million for every R5,000 you want to receive each month as a pension.
assuming that for every R5,000 you wish to withdraw each month once you’re retired, you’ll need R1 million invested in an annuity. Therefore, you must have saved R5 million by the time you retire if you wish to get a monthly pension of R25,000.
3: Multiply your monthly needs by 300
To calculate the lump sum you would need to have saved, one of the simplest computations is to multiply what you believe you will require each month (let’s say R25,000) by 300. (R7.5 million in our example). The fact that this choice provides a somewhat higher figure than the other two possibilities is advantageous.
The truth is that the money you spend each month paying off debt might be invested in a retirement plan or at the very least something that will ensure you have a pleasant retirement.
What amount is required for the typical South African to retire?
R432,000 should represent 4% of your entire savings to make sure you don’t spend all of your retirement money in 30 years. This means you would need R10. 8 million saved to take 4% or R432,000 annually
What is the best investment for monthly income in South Africa?
An excellent strategy to increase your monthly income is to purchase government, corporate, or agency bonds. Governments, institutions, and businesses all issue bonds as a kind of debt in order to raise money.
