Are you generating enough money now to last you through your retirement. 

The standard yardstick for retirement is that you will need about 10 times your annual salary to live comfortably – maintaining your current lifestyle, during your golden years. So if you earn R1-million per year now, you’re going to need R10-million in your pocket at retirement age. 


Get the following information to create a clear picture of where you are and where you should be going: 

A retirement budget: Consider things like where you will live and what other costs you will face. Take a look at your current budget and extrapolate this to consider any changes that may occur when you retire.

A list of assets: This will give you an idea of your net worth. Include your home, cash, life insurance and any investments.

An income projection: Total up the income you can expect to receive, including you pension and anything from other investments.

Financial calculations: Now that you have an idea of your retirement budget, you need to work out just how you are going to finance your retirement lifestyle. 


A bond-free home. Put a bit extra in your bond now to ensure that you are rid of this come retirement.

Freeing yourself of debt. Pay up for your car and anything else that you owe money on.

Joining a great medical aid. Your medical expenses will skyrocket as you get older, so the support of a comprehensive medical aid is essential. 


The experts will tell you that the key thing when investing for retirement is to ensure that you beat inflation. Your retirement savings have to match or beat price increases, or your post-retirement lifestyle will be seriously compromised. For instance, if the inflation rate is 6% per annum, your income will go down by 6% per year. You therefore have to replace this 6% with a portfolio that is going to grow above inflation. 


Once you have a clear idea of where you are financially and how much you can put away regularly to fund your retirement, you need to identify the right vehicles for your investment needs. 

Your decision will be influenced by your life stage and the number of years left until you retire. 

You should also aim to ensure that any investments are as tax efficient as possible. Also factor in all costs – including advisor’s fees, upfront fees and ongoing administration fees – and make sure you understand why they are being levied. These fees will erode your investment, so make sure you understand them fully. 

A good investment portfolio has probably got 60% equities and the balance in bonds and cash. “You need to be exposed to the equity markets because this is the only way you are going to grow the money above inflation. If you just earn interest you are never going to be inflation.” 


Putting all your eggs in one basket 

Just belonging to a pension fund isn’t enough, you need to look beyond this at other financial instruments such as an endowment policy or a retirement annuity. Business owners can also take advantage of the tax incentives offered when investing in a retirement annuity – your contributions are fully tax deductible. 

Dipping into your pension money 

You should not dip into your pension money for any reason other than permanent disability or if you are unable to work. Anyone who suggests you access these funds to start a business is completed misguided. 

One of the main reasons South Africans do not have adequate retirement income is that they cash in their retirement savings when they change jobs. Only 5 to 10% of South Africans are expected to retire with sufficient income. 

Preserving retirement funds is key. “When you move jobs, you should first look at transferring the amount to your new employer’s fund or, alternatively, a preservation fund or retirement annuity. 

Thinking your expenses will be lower as a retiree 

This is a fallacy and a trap that people often fall into. 


Liz Black – Your Business