It’s the question we hear more than almost any other: “How much do I need to retire?” And the honest answer — the one most people don’t want to hear — is: it depends.
It depends on when you want to retire, how you want to live, where you’ll live, what your health looks like, and what you want to leave behind. There’s no single number that works for everyone. But there are clear principles that can help you figure out your number.
Start with what you spend, not what you earn
Most retirement calculators focus on income replacement — typically suggesting you’ll need 75% of your final salary. That’s a rough starting point, but it misses the detail that actually matters: what do you spend?
Two people earning the same salary can have very different retirement needs depending on their lifestyle, debt position, and obligations. The more useful question is: what does your life cost today, and how will that change in retirement?
“Retirement planning isn’t about reaching a magic number — it’s about understanding your life and building a strategy that supports it.”
Some costs go down in retirement (commuting, work clothes, possibly your bond). Others go up — particularly healthcare, travel, and the cost of filling your time in meaningful ways. Build your plan around real spending, not rules of thumb.
The 4% rule — useful, but limited
You may have come across the idea that you can safely withdraw 4% of your retirement savings each year without running out. This originated from a US study in the 1990s and remains a popular benchmark.
In South Africa, it’s a reasonable starting point — but several factors can change the picture:
- Inflation: South Africa’s inflation has historically been higher and more volatile than in the US, meaning your money needs to work harder to maintain purchasing power.
- Currency risk: If any of your retirement income is rand-denominated, you’re exposed to currency depreciation against major currencies.
- Longevity: People are living longer. A retirement that starts at 60 might need to last 30+ years.
- Sequence of returns risk: Poor investment returns in the first few years of retirement can have an outsized impact on how long your money lasts.
A withdrawal rate of 3.5% to 4% is a useful planning assumption, but it’s not a guarantee. Regular reviews and flexibility are essential.
What does “comfortable” actually mean?
This is deeply personal — but here are some benchmarks to help frame the conversation:
Basic retirement: You can cover essentials — housing, food, utilities, transport, basic healthcare. You’re not struggling, but there’s limited room for extras.
Comfortable retirement: You can maintain your current lifestyle broadly — regular dining out, an annual holiday, hobbies, and good healthcare cover. You don’t need to think twice about everyday spending.
Affluent retirement: You can do what you want, when you want. International travel, helping family financially, philanthropy, and a meaningful legacy.
Most people we work with are aiming for somewhere between comfortable and affluent — and the gap between the two is often smaller than they expect when proper planning is in place.
How to close the gap
If the numbers don’t quite add up yet, there are several levers you can pull:
- Increase your savings rate. Even small increases compounded over time make a significant difference.
- Delay retirement. Working even two or three years longer can dramatically improve your position, because you’re saving more and drawing down for fewer years.
- Optimise your investment strategy. Make sure your portfolio is structured for growth during your accumulation years, and gradually transitions to income-generating assets as retirement approaches.
- Reduce unnecessary costs. Fees, taxes, and poorly structured products erode wealth quietly over time. A review can often uncover savings.
- Plan for phases. Early retirement might be active and expensive; later years might be quieter. Your plan should reflect that.
The most important step
The single most important thing you can do is get a clear picture of where you stand today. Not a guess, not an assumption — a proper financial plan that models your income, expenses, assets, and goals over time.
From there, everything else becomes a conversation about choices — and that’s where good advice makes the difference.
If you’d like to understand what a comfortable retirement looks like for you specifically, we’d be happy to walk through the numbers together.
