Most financial advisors estimate that South Africans need to be able to replace 75% of their income to retire comfortably. Some estimate that figure will rise to 90% in the near future, given higher life expectancy and soaring medical costs. Yet the World Bank estimates that only six percent of South Africans are saving enough for retirement.
In an article published on BusinessTech.co.za, Jaco van Tonder, director of advisory Services at Investec Asset Management, says a 20 year-old will need to save R921 a month to arrive at a capital lump sum of R1 million at age 65. Someone who starts at the age 40 will need to save R2326 per month, while a 50-year old will need to save R4546 per month.
R 1 million is a good figure for an example of the math, yet most middle-class South Africans will need to save far more for retirement. According to an article in Personal Finance, someone with no debt and a fully paid-up house would need to have saved R6 million to live comfortably off R20 000 a month.
Increased life expectancy and inflationary pressure begets the question: “How much is enough to retire whilst maintaining your standard of living?” Research indicates the earlier you start saving for retirement, the better. Aside from promoting healthy saving habits, it allows for the power of compound interest; it’s not about how much you save, but when.
Innovation in financial technology are taking strides in encouraging savings through making investments, both physically and fiscally, more accessible. It’s now easy to trade or add funds through mobile investment platforms or implement a diversified investment strategy through Robo advice. Technology coupled with an appropriate savings’ time frame is enabling access to wealth generation. Use technology in your favour to either start saving or augment your existing investments.
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