You, no doubt, have a retirement dream, whether it’s working on your golf game, touring Europe, learning to paint, or just spending time with your ungrateful children and bratty grandkids. Whatever the specifics, you have a dream of a life after work, a life spent doing the things that you love with the people that you care about.

Unfortunately, if you’re like most people, this dream is unlikely to come true. The reality is that many people don’t manage to retire at all, let alone to retire to a leisurely life of golf, travel, and domestic bliss. Instead, many people find themselves facing a serious financial shortfall when they hit retirement age, with far too little in the way of savings to maintain their lifestyles.

Their usual recourse, at this point, is to just keep working. According to Old Mutual’s Retirement Monitor, some 58% of South Africans expect to have to continue working after reaching the retirement age of 60.

Admittedly, in a world of lengthening life-spans, working for a few extra years is not necessarily a huge disaster-many people will live for 15 or 20 years beyond the age of 60, and there’s no reason why some of those years can’t be spent in productive employment. Nevertheless, it does become harder to keep up the pace as one ages, especially in professions that are physically demanding or reliant on new technologies. And, after all, one doesn’t want to work forever. Eventually, almost everyone wants to retire, and it’s unfortunate that, for many South Africans, when they reach that point they realise that their dreams of happy golden years are not to be.

According to Old Mutual, less than a quarter of working people in South Africa retire with enough in the way of savings to maintain their standards of living, a grim statistics that is the result of a combination of ignorance, lack of foresight, and a tendency to neglect retirement savings in favour of saving for education and other things.

So how do you avoid becoming one of the 75-odd percent of South Africans with inadequate retirement savings? The answer is simple: figure out more or less how much money you will need upon retirement, set out a plan to achieve the necessary levels of savings, and start saving right now.

How much do you need?

It’s tricky to know exactly how much money you’ll need for retirement. In part, it depends on what you plan to do during those years, as well as on how long you live and other factors beyond your control, such as the inflation rate during your later years.

Nevertheless, there are some rough approximations you can use. One popular way of figuring out how much money you’ll need upon retirement is to use the so-called replacement ratio, which is calculated by dividing your post- retirement income by your pre-retirement income. In general, experts reckon you should aim for a replacement ratio of 75 to 80%, that is, you should bank on needing a post-retirement income equal to about 80% of your current income-the reason you need less after retiring is that certain costs, especially retirement savings but also the costs of raising children, bond repayments and the like, are (or should be) eliminated after you retire.

Based on an 80% replacement ratio, if you currently earn R10 000 a month, you’ll need about R8 000 a month after retirement to maintain your standard of living. You therefore need to accumulate enough savings to generate this amount every month.

You also need to take into account the effects of inflation. If inflation is 5% a year, and you need R8 000 a month this year, you’ll need R8 400 next year, and R8 820 the year after that. Considering that the average fixed deposit will pay you around 5% a year, you’ll need a pretty generous wad of cash to sustain you at these levels.

Another rule of thumb that is sometimes floated is that you should be saving about 15% of your income. This is a good goal for a younger person, however, if you’re getting on in years and retirement is approaching, you’ll need to be saving a lot more than that. Someone in their 30s should be aiming to save at least 20% of their monthly income, and should be investing that money in a mixture of equities and other assets to ensure that the value of his or her savings isn’t eaten away by inflation.

As a rule, the human species is pretty bad at long-term planning- witness our difficulty in dealing with problems like national debt burdens and climate change. Nevertheless, if you want to retire in comfort, you’ll need to overcome your natural indolence and put a savings plan into action. Only by doing this can you avoid the unpleasant fate of having to work when you should be golfing.