South Africa retirement budget: disproportionally skewed due to the wide income gap, which causes retirement expenses to vary significantly – meaning R20k a month is a distant dream for millions of people in South Africa.
The “Basic Retirement Sum” (BRS): a term used to define a minimum amount of savings needed to ensure a basic level of retirement income. Whilst not a term used in South Africa, it does illustrate how much money you need (unincumbered) to scratch out a basic living.
- This means retirees are expected to have at least this amount saved (or in a safe investment portfolio) to maintain a reasonable monthly income.
I’m no financial wiz – but to my thinking, a million Rand in the bank is the financial equivalent of trying to cross the Sahara on a bicycle with a single bottle of water. R1-million / 20-years (years you have left before the wheels fall off) = +/- R4,500 /month – You really have to master the art of “Ubuntu Living” to scratch out a living on 4k a month.
– Verdict: R1-million savings is not near enough unless your retirement plan includes winning the lottery -or never actually retiring.
State Pension: (don’t get me started) – but for the sake of clarity –
– State pensions have risen slightly, with minimum monthly payments increasing from R3,100 to R3,750, and higher-end pensions reaching R4,500. Clearly, state pensions are far below what’s needed for a comfortable retirement.
Private Retirement [AKA volatility, inflation, regulatory changes, economic shifts].
– A private retirement fund of R5 million will generate a livable monthly income, but the exact amount depends on whether it’s structured as a living annuity or life annuity.
Retirement budget reality check
For a comfortable retirement, you’ll need to earn R20,000 to R30,000 per month, depending on housing, healthcare, and lifestyle choices.
OK, It’s time for a disclaimer: — unless you plan to retire on a beach selling ice cream or coconut art 🏖️💰 don’t take my word for anything I say here – consult a real professional!
Monthly Budget:
| Housing: | Low-end | Med / high end |
| Levies / Body Corporate | R1,500 | R3,000 |
| Rates & Taxes | R750 | R1,500 |
| Maintenance Fund | R200 | R500 |
| Utilities: | ||
| Electricity / Water | R1,000 | R2,000 |
| Garbage / Municipal | R200 | R400 |
| Internet / Phone | R500 | R1,000 |
| Insurance: | ||
| Home Contents | R300 | R500 |
| Health & Medical | R3,000 | R7,000 |
| Life Insurance | R300 | R500 |
| Groceries: | ||
| Food, etc. | R5,000 | R8,000 |
| Transportation: | ||
| Fuel / repairs | R1,000 | R3,000 |
| Healthcare: | ||
| Dining out | R1,200 | R2,000 |
| Activities | R500 | R1,000 |
| Miscellaneous | R500 | R1,000 |
| Clothing & personal | ||
| Emergency Savings Fund | R500 | R1,000 |
| Estimated Monthly Expenses: Low Range: R16,950 /m Mid Range: R25,000 /m Ideal Range: R30,000+ /m For a mid-range expense figure of R25,000 per month, your gross income should be closer to R30,000 per month. |
South African Government Pension – Key Factors
The South African Old Age Pension offers limited financial support and may not cover all basic expenses 🙁
Who Qualifies?
✔ Must be a SA citizen, permanent resident, or refugee
✔ Must live in South Africa
✔ Cannot receive other social grants or live in a state institution
✔ Income must be ≤R86,280 (single) / ≤R172,560 (married)
✔ Assets must be ≤R1,227,600 (single) / ≤R2,455,200 (married)
Pension Amounts (April 2024):
🔹 Age 60-74: R2,180 per month 🔹 Age 75+: R2,200 per month
⚠️ If your assets exceed the set limits, you do not qualify for the state pension. However, you can receive private retirement income and still qualify—if within the income thresholds.
How Much Do You Need to Retire Comfortably?
R25,000. Over a year, that totals R300,000 in living expenses 😐
A widely recognized financial rule suggests withdrawing 4% annually from your savings to maintain long-term sustainability.
The theory of the 4% rule –
Simply put, the rule says that if retirees withdraw 4% of their savings annually (adjusting this amount for inflation every year thereafter), their money will last 30 years.
Based on this guideline:
📌 R300,000 ÷ 0.04 = R7.5 million (gasp!)
This means you’d need retirement savings of R6,5M – R7.5M to support this lifestyle and not run out of money.
If your investments earn 7% annually, you could withdraw 4%, allowing the remaining 3% to counteract inflation and preserve your investments. This strategy ensures your savings last indefinitely- barring unforeseen economic factors 😐
Of course, your situation improves if you own a paid up rental property producing income (lucky you). The numbers change dramatically – as do with other investments. Many retirees supplement their income with rental properties, or part-time work.
For most of us, our retirements funds are largely insufficient 🙁 and an income boost helps significantly. This is not entirely a bad thing – keeping busy and engaged is good for longevity and as they say #skillspaybills.
Many retirees, unfortunately, are too late to set aside a South Africa Retirement Budget allocation to ensure sustainability – but it’s not too late (normally) to make other plans (think out-the-box).
- Down-size (move in with your kids)
- Find a great niche to earn extra cash – i.e. desktop keyboard cleaning service
- Create space in your house for rentals – i.e. student rooms