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Retirement
Retire with confidence: retirement savings, made simple
Life isn’t over when you stop working. In fact, we’re living longer than ever – so it’s never too early to start saving for retirement. But whatever your age or life stage, what you need is a solid plan to get you started – and to help you stay on track to reach your retirement savings goals. This is what will give you the confidence that you can live your later years exactly as you want.
Understand retirement
Grow your savings
Use the power of compound interest to grow your retirement savings
Most great fortunes are built slowly on compound interest. Think of compound interest like a single snowflake that triggers an avalanche. Each small contribution you make adds up, eventually creating a powerful force that speeds up your savings growth.
Thando
Invests R1 000 per month over 25 years
Total contribution of R658 374
Illustrative value
R2 067 624/in 25 years
Cindy
Invests R5 000 per month over 10 years
Total contribution of R790 848
Illustrative value
R1 268 628/ in 10 years
The illustration above is for information purposes only. Monthly contribution is assumed to increase with inflation each year, at an assumed rate of 6% per year. Illustrative values use an investment return assumption of 10% per year, after fees
How to save
But what if I haven’t started saving for retirement?
The best time to start saving is yesterday. The second-best time is today – or right now. It's never too late to begin. The key is to start now and contribute as much as you can afford. Even small amounts can grow significantly over time with the power of compound interest. Meet Thabo, Cathy and John. They each invest R1 000 per month in an RA. Their planned retirement age is 60.
Thabo
Started at age 25, with a moderate-aggressive risk profile
Total contribution of R1 337 217
Savings at age 60
R6 451 841
Cathy
Started at age 35, with a moderate risk profile
Total contribution of R658 374
Savings at age 60
R1 599 653
John
Started at age 45, with a cautious risk profile
Total contribution of R279 312
Savings at age 60
R420 071
The illustration above is for information purposes only. Monthly contribution is assumed to increase by inflation each year, at an assumed rate of 6% per year. Illustrative values use an investment return assumption, after fees, of 10% per year for moderate-aggressive risk profile, 8% per year for moderate risk profile and 6% per year for cautious risk profile. Speak to a financial adviser before making any investment decisions.
The 15X final salary rule
To ensure a comfortable retirement, aim to save 15 times your final annual salary by the time you retire. Here's a breakdown of how much you should have saved at each stage of your career to stay on track.
How exactly does compound interest work?
How it works
Make a retirement annuity (RA) part of your savings journey
Retirement annuities (RAs) offer numerous benefits including tax advantages and protection against creditors. Watch the video to learn more about why an RA is a smart choice for your retirement savings.
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FAQs
Retirement planning FAQs
- What is the best age to start saving for retirement?
The best age to start saving for retirement is as early as possible. Starting in your 20s allows you to take full advantage of compound interest, but it's never too late to start saving.
- How much should I save each month for retirement?
The aim is to save as much as you can afford. Use our Retirement Calculator to estimate how much you should aim to save, and speak to a professional financial adviser before making any investment decisions.
- How does the two-pot retirement system work?
With the two-pot retirement system, your contributions are allocated into two different components: two-thirds go towards retirement preservation, and one-third goes towards a cash lump sum at retirement. This system provides more flexibility in accessing funds in an emergency while still saving for the future.
- What happens to my retirement savings if I resign or if I am retrenched?
Employees who are members of their employer’s pension and/or provident fund can access all savings in the vested component and accumulated savings in the savings component. If such employees are also members of a retirement annuity fund, only the savings component can be accessed.
- Should I save for retirement or clear my debt first?
It's generally recommended to balance both. Prioritise paying off high-interest debt while also setting aside some money for retirement. This ensures you're reducing debt and still benefiting from compound interest on your savings.
- How does a retirement annuity compare to pension and provident funds?
While all three of these options qualify for the same tax benefits, there are significant differences between them. Both pension and provident funds are offered by an employer – often as a condition of employment – with you and your employer making monthly contributions to these funds. Retirement annuities, on the other hand, are taken out by the individual, meaning you’re free to contribute to one whether you’re self-employed or you already contribute to a pension or provident fund.
- What are the benefits of a retirement annuity?
Your retirement annuity contributions reduce your taxable income up to certain limits.
Another big tax advantage is that the growth on your investment is tax-free.
Your retirement annuity is protected from creditors. In the event of insolvency, they won’t be able to take from your savings.
You can build your retirement savings with monthly contributions or start with a once-off contribution and make regular additions at any time.
You can decide when you want to start, how much to invest, and the underlying investment choices you would prefer.
A retirement annuity can be part of your savings journey as a standalone option or to supplement your pension or provident fund savings.