It is never too early to start planning for your retirement and it is important to obtain the right retirement advice as early as possible. The reality is that a large number of people, employed or even-self-employed, retire on less income than they would like.

Countless studies have tested what level of income is sustainable to have the highest probability of not drawing down your capital and decreasing your income over time. The results of these studies are somewhat varying, but as a maximum let’s assume that the income-drawdown per year should not be exceeding 5% of your capital.

 

Now let us take a look at Monica.  She is 30 years old and would like to receive an income of R 20, 000 per month at retirement. She is a member of her employer’ pension fund for the past two years and has no other retirement savings.

 

How much capital would she require to receive a monthly income of R 20 000 at retirement?

 

Today, at a 5% income rate Monica needs capital of R 4 800 000 to receive an income of R20 000 per month when she retires. This income is before tax, meaning that she will end up with less income after tax. .

 

But Monica is Not retiring today. She only plans to retire in 35 years’ time when she turns 65. Let’s assume that the average inflation over this period will be 5% per annum.  She will therefore need R 110, 320, per month to buy the same goods that R 20 000 buys her today.

 

So, how much capital will she need in 35 years’ time to receive that income?……..R 26, 476, 874.

 

If you were Monica, consider the following:

  • Will your employer pension fund really be able to give you R 26, 476, 874?
  • Are you saving enough in order for you to receive your desired income at retirement?

 

Retirement is not much fun when you don’t have enough money. “A penny saved is a penny earned”.

 


Feel free to get in touch and let us help you get some peace of mind.

It is never too early to start planning for your retirement and it is important to obtain the right retirement advice as early as possible. The reality is that a large number of people, employed or even-self-employed, retire on less income than they would like.

Countless studies have tested what level of income is sustainable to have the highest probability of not drawing down your capital and decreasing your income over time. The results of these studies are somewhat varying, but as a maximum let’s assume that the income-drawdown per year should not be exceeding 5% of your capital.

 

Now let us take a look at Monica.  She is 30 years old and would like to receive an income of R 20, 000 per month at retirement. She is a member of her employer’ pension fund for the past two years and has no other retirement savings.

 

How much capital would she require to receive a monthly income of R 20 000 at retirement?

 

Today, at a 5% income rate Monica needs capital of R 4 800 000 to receive an income of R20 000 per month when she retires. This income is before tax, meaning that she will end up with less income after tax. .

 

But Monica is Not retiring today. She only plans to retire in 35 years’ time when she turns 65. Let’s assume that the average inflation over this period will be 5% per annum.  She will therefore need R 110, 320, per month to buy the same goods that R 20 000 buys her today.

 

So, how much capital will she need in 35 years’ time to receive that income?……..R 26, 476, 874.

 

If you were Monica, consider the following:

  • Will your employer pension fund really be able to give you R 26, 476, 874?
  • Are you saving enough in order for you to receive your desired income at retirement?

 

Retirement is not much fun when you don’t have enough money. “A penny saved is a penny earned”.

 


Feel free to get in touch and let us help you get some peace of mind.