How much to save for retirement

Start with a target

Financial planners often aim for a retirement income of about 75% of your final salary, because some costs, such as work travel and saving for retirement itself, fall away. To draw that income sustainably for 20 to 30 years, you typically need savings of around 15 to 17 times your final annual salary, depending on returns, inflation and how long you live.

Rules of thumb by age

These are rough checks, not guarantees. If you are behind, the most powerful levers are saving more, working a few years longer, and not cashing in retirement savings when you change jobs.

Why starting early matters

Thanks to compound growth, money saved in your twenties has decades to grow. Saving R 1 000 a month from age 25 to 65 at a 10% yearly return grows to about R 6,3 million. Starting at 35 gives about R 2,3 million, and at 45 about R 0,8 million. These are nominal figures before inflation, but they show how much the early years count.

Using the tax breaks

• Contributions to pension, provident and retirement annuity funds are tax-deductible up to 27.5% of your income, capped at R 430 000 a year.
• Under the two-pot system, most new contributions go to a retirement pot you cannot touch until retirement, so savings are protected.
• Increase your contribution each time you get a raise, so your lifestyle does not absorb the whole increase.

Frequently asked questions

Is the government pension enough?

The older person’s grant is a basic safety net, means-tested and small compared with most salaries. It is not designed to replace your income.

What if I started saving late?

Save as much as you can, use the full tax deduction, consider working a few years longer, and plan to reduce costs such as paying off your home before you retire.

Should I pay off debt or save for retirement first?

Pay off expensive debt such as credit cards first, but keep contributing enough to get any employer contribution, which is free money.

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