Mind’s abuzz with impossible questions

01 April 2017 Itransact

One of the questions we ask ourselves most is how much do I need to retire comfortably?

It is also one of the most difficult questions to answer, and would depend on how early in life you first ask this question and then act upon it. It also depends how regularly you ask yourself and review this question as you move through your life.

Thinking further
It is also a question about how much money you have to save, and the costs of saving.

The answer lies in how much time one has. However, before we get to the answer, let us revisit some well-known South African statistics.

Are you a statistic?
If you are one of the 6% of South Africans who can retire comfortably at age 65; then this article is not for you. You should disconnect from the woes of the world, and go enjoy your golden years to the fullest.

For the rest of us – over 36% - will have to continue working beyond 65.

If you are fortunate to have a job beyond 65, well done, you too could eventually join the 6% already sunning themselves on the beach.

For 47% of us who are left – who do not have the ability to earn an income after 65 – we will end up depending on family or friends to help us survive.

Then there are the luckless 16% who do not have the luxury of family and friends for whom we can say we are doomed.

The answer
How much is enough? Typically, a person needs to save up an amount of roughly 15 times their last annual salary at retirement to invest in a pension type product.

What time period are we looking at? It depends on how early you start saving. Remember, the earlier the better.

If you begin working at age 20, you have 540 pay checks to save. If you only start at age 40 you only have 300 pay checks left. If you leave things to the very last minute, say until 50, you are reduced to 180 pay checks.

To obtain an accurate answer however, you need to obtain advice from a qualified financial adviser who can take your personal circumstances into consideration and provide the most suitable product for you and your pocket. Remember, there are a confusing amount of expensive retirement products out there.

Effective methods
Retirement products constructed from Exchange Traded Funds (ETFs) are amongst the most cost effective ways to ensure you reach retirement goals. Do not let the costs of investing cost you your investment.

Upon retirement, Warren Buffet had this to say: Most investors, big and small, will find the best way to save is to own index funds, ETFs, that own the entire stock market and that charge minimal fees.

This works; witness how the combined average of all South African equity fund managers fared against the All Share Index over the past 20 years.

This example assumes a total return after costs with a R100 000 initial investment.


At the end of the day, every person needs to save differently. However, when presented with the option of ETFs, does it not seem an appealing option? 

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