How to make your retirement savings last
*This content is brought to you by Brenthurst Wealth
By Charize Beukes*
Retirement is a time to enjoy the life you have worked hard to build. To do that, your savings need to work just as hard. By making smart decisions, you can ensure your money lasts for as long as you need it.
Even with South Africa's economic challenges, there are practical ways to make your savings stretch further. Here is how to take charge and create a retirement plan that works for you.
Start with the right withdrawal rate
The amount you withdraw every year is a key factor that determines how long your savings last. Experts recommend starting with a withdrawal rate of 4% to 5%.
For example, if your living annuity is worth R6 million, withdrawing 5% gives you income of R300,000 per year. This keeps your savings steady while allowing for inflation adjustments.
If you draw too much too soon, you risk running out of money later. The Association of Savings & Investments SA (ASISA) data in the table below shows that a withdrawal rate higher than 8% can quickly drain your savings, especially if investment returns are low.
| Annual withdrawal rate | Investment return per annum (before inflation & after all fees) | ||||
| 2.5% | 5% | 7.5% | 10% | 12.5% | |
| 2.5% | 21 years | 30 years | 50+ years | 50+ years | 50+ years |
| 5.0% | 11 years | 14 years | 19 years | 33 years | 50+ years |
| 7.5% | 6 years | 8 years | 10 years | 13 years | 22 years |
| 10.0% | 4 years | 5 years | 6 years | 7 years | 9 years |
| 12.5% | 2 years | 3 years | 3 years | 4 years | 5 years |
| 15.0% | 1 year | 1 year | 2 years | 2 years | 2 years |
| 17.5% | 1 year | 1 year | 1 year | 1 year | 1 year |
What this table tells us:
Choose your withdrawal rate wisely: Lower withdrawal rates (e.g., 4% or 5%) significantly extend how long your money lasts, even with modest returns.
Higher investment returns buy you time: If your portfolio achieves returns of 7.5% or higher, your savings could last decades at a lower withdrawal rate.
Avoid high withdrawal rates: Drawing more than 8% annually shortens your savings' lifespan dramatically, even with strong investment performance.
Plan for inflation
Inflation reduces the value of money over time, so it is important to plan ahead. Although inflation recently dropped to 3.8%, it is safer to assume an average of 6% per year for retirement planning. This helps you account for rising costs and keep your budget realistic. Reviewing your plan regularly ensures it stays up to date.
Invest for growth
Your investments play a significant role in how long your savings last. A balanced portfolio with a mix of equities, bonds, and cash can help you earn steady returns. For many retirees, a portfolio with about 55% equity exposure works well.
If you need to withdraw more than 4%, you may need to adjust your investments. Taking on slightly more risk with equities can give your savings the growth needed to support higher withdrawals.
Keep track of expenses
Living costs often rise in retirement, especially for healthcare and utilities. A simple budget can help you stay in control. Divide your income into three categories: essentials, discretionary spending, and savings. Making small changes, like cutting unnecessary expenses, can free up money for what matters most.
Get help from a professional
Working with a qualified financial adviser can transform your retirement planning experience. We are here to simplify the process and make sure that every decision aligns with your goals and circumstances.
Together, we will establish a withdrawal rate that works for you, adjust your investments as needed to stay ahead of market changes, and prepare for potential challenges like rising healthcare costs. With regular check-ins, your financial advisor can help keep your plan on track and give you the reassurance that your retirement savings are working as hard as you have to secure your future.
Once you start down this journey of preparing for the future, you will realise that retirement planning does not have to be overwhelming. With the right steps, your savings can provide security and freedom for years to come. The sooner you start, the stronger your financial future will be.
* Charize Beukes, CFP® is a Financial Planner at Brenthurst Wealth Pretoria charize@brenthurstwealth.co.za
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