{"id":10854,"date":"2017-08-24T01:20:34","date_gmt":"2017-08-24T01:20:34","guid":{"rendered":"https:\/\/yourlifeassist.co.za\/sizani\/1889-how-long-will-your-money-last-during-retirement1b83\/"},"modified":"2021-03-10T07:00:25","modified_gmt":"2021-03-10T07:00:25","slug":"1889-how-long-will-your-money-last-during-retirement1b83","status":"publish","type":"post","link":"https:\/\/yourlifeassist.co.za\/sizani\/1889-how-long-will-your-money-last-during-retirement1b83\/","title":{"rendered":"How long will your money last during retirement?"},"content":{"rendered":"<p>The first thing on the road to retirement security is to figure out how much you can spend from your nest egg every year without eventually going broke.<\/p>\n<div id=\"all\">\n<div id=\"main\">\n<div class=\"item-page\">\n<p>If you bought into a pension, provident and\/or retirement annuity fund to make provision for your retirement, the pension will be a percentage of your final salary, called the income replacement ratio (IRR). For most people an IRR of 60% to 80% means that they&#8217;ll be able to maintain their standard of living in retirement as they&#8217;ll have less debt.<\/p>\n<p><strong>How to achieve an IRR of between 60% and 80% assuming that you&#8217;ve no capital saved for retirement<\/strong><\/p>\n<p>By making a few relatively conservative assumptions and using the annuity rates for males (women need a bit more as they typically live longer than men), the following are rough estimates of the portion of your income you&#8217;ll need to invest to achieve an IRR of 60%:<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>If you have 40 years left to retirement you must save 15% of your income<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>If you have 35 years left to retirement you must save 18% of your income<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>If you have 30 years left to retirement, you must save 22% of your income<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>If you have 25 years left to retirement, you must save 28% of your income<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>If you have 20 years left to retirement, you must save 36% of your income.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong>Taxation Laws Amendment Act<\/strong><\/p>\n<p>According to this act, a tax deduction up to 27.5% of income (up to R350 000) is allowed on all contributions made towards a retirement fund. Members of provident funds will also be able to claim a tax deduction on contributions to their funds. However, the conversion of a portion of the retirement money into income at retirement will only apply to new contributions made by those who are younger than 55 on 1 March 2016. Members who are 55 years and older will still be able to take contributions made after the legislation has come into effect as a cash lump sum in retirement.<\/p>\n<p><strong>Inflation after retirement<\/strong><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>As a rough rule of thumb, R1m worth of capital will provide R5,000 of income, increasing with inflation, for 20 years.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>As you grow older, you&#8217;ll probably spend more on medical insurance. Comprehensive cover costs more, will consume a larger portion of your budget and will increase each year on average at 4% above inflation.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>You may be less affected by transportation costs, as you&#8217;re unlikely to commute as much as when working.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>You may be less affected by the prices of electronic goods, take-away foods and other luxuries, as pensioners typically spend less on these goods.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>You should ideally have paid off your home loan, vehicle and other asset finance, which means you shouldn\u2019t be exposed to changes in lending rates.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>You&#8217;ll most likely spend a larger portion of your budget on electricity and be affected by increases in energy costs.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>Sources<\/strong><\/p>\n<p>www.702.co.za<br \/>\nwww.businesstech.co.za<br \/>\nwww.iol.co.za<\/p>\n<\/div>\n<p>&nbsp;<\/p>\n<\/div>\n<p>&nbsp;<\/p>\n<\/div>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The first thing on the road to retirement security is  [&#8230;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38,40],"tags":[],"class_list":["post-10854","post","type-post","status-publish","format-standard","hentry","category-your-future-financial","category-your-future-retirement"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How long will your money last during retirement? 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