The Road to a Comfortable Retirement: Understanding South Africa’s Savings Benchmark

Planning for a comfortable retirement is a significant concern for many South Africans, with the key question being: how much

should one save to sustain their current standard of living? Paul Hutchinson from Ninety One provides some much-needed clarity on what constitutes a comfortable retirement sum.

The formula for achieving a comfortable retirement is founded upon a simple multiplier: save 20 times your annual salary before leaving the workforce, to maintain the same lifestyle in retirement. This figure is based on the assumption of withdrawing a sustainable 5% from your retirement capital annually, which is projected to last for 30 years factoring in inflation adjustments.

To put this into perspective, a yearly income of R500,000 translates to a necessary retirement savings of R10 million, while an annual salary of R250,000 requires a savings goal of R5 million. These targets place a direct correlation between one’s final salary and their requisite retirement capital.

Hutchinson emphasizes the importance of disciplined savings from an early age. Initiating this process at age 20 and persistently saving 15% of your pre-tax income could afford you a comfortable retirement at 60. Alternatively, starting a decade later at age 30 means upping the savings rate to 30% to achieve the same financial goal, due to the shorter savings timeframe.

This disciplined approach might seem challenging, but it is foundational to realizing a stress-free retirement. By calculating and adhering to these savings percentages, individuals can assure their future independence and financial security.