Weekly Thoughts 27 October 2016

I’ve had more than a few conversations recently with different folk on the topic of ‘how much money does one need to retire?’ There is not a straight forward answer to this question. If someone has saved, from day one of their working life, 15% of their taxable income and at least another 5% of after tax income and has never spent pension monies between job changes, they will be able to retire on a similar standard of living to what they were accustomed to during their working life. So for a policeman, or a teacher, or another young professional starting out in life, if they apply the above savings plan they will be able to retire on a similar standard of living. Such a person could end up with a fixed pension or maybe investments amounting to 5 or 6 or 7 million Rand, in today’s terms, and retire independently. A side line to this is that we need to arrive at this point in life without any debt and a paid off house.

What one person needs or wants is not another person’s needs. The problem is more around not having saved enough to support the same lifestyle that one has been accustomed to during your working life. Then a person has to cut their cloth to fit their money, whatever that cutting might entail. For some folk it might mean no more overseas trips, for others cutting back to one car if they had two, or no more DSTV or no more private medical aid. And so on.

So how much do you need is not the question. The question is have you saved appropriately during your working life.