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The Financial Wellness Coach: How to calculate your retirement savings capital

The Financial Wellness Coach: How to calculate your retirement savings capital
Kenny Meiring
By Kenny Meiring
5 Jun 2025
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The amount of retirement capital that you need depends on how much you will require to live on every month.

Question: My friends tell me I need R30-million in order to retire. My savings are nowhere near that. Am I in trouble?

Answer: The amount of money that you need in order to retire will depend on how much you need to live on when you have retired.

I do a lot of retirement counselling with individuals approaching retirement, and determining how much they need to live on is always the first step in the planning process. I’ve found that this amount can vary dramatically – from as little as R8,000 to as much as R230,000 per month.

Depending on how much you need in a month, the amount of retirement capital that you need will vary. If you need an after-tax income of R100,000 a month, you will need about R32-million in savings. I suspect that this is where the R30-million story comes in. However, I find that most retired people I help need an after-tax income of between R30,000 and R50,000 a month.

I will go through the factors you need to consider when working out how much you will need in order to retire.


Monthly retirement budget


The first step in working out how much you need when you retire is to get an idea of how much you need to live on each month.

I would recommend that you draw up a budget based on what you are spending now, and then amend it to reflect the type of spending pattern you may have when you retire. For example, your parking and lunchtime costs will probably reduce and your medical costs will increase.

If you need help here, I have a retirement budget spreadsheet that I can email to you.

Tax


Once you have figured out how much you need, increase that amount to account for income tax.

Drawdown rate and investment strategy


You need to ensure that you will have enough money to live on until you, your spouse and any dependants pass away.

As one in 10 of us is likely to live to 100, you need to plan on having enough capital for the next 35 years when you retire. What’s more, this capital needs to be invested in such a way that it can withstand all the economic and political challenges that you are going to experience over the next 35 years.

For someone who is retiring at the age of 65, just think back to what the world was like when you were 30 and all the political and economic challenges you had to deal with.

When you retire, you will have a similar set of challenges, but will only have your retirement capital to depend on. There will be no promotions or performance bonuses to help you. It is therefore vital that you get the right investment strategy in place.

The recommended drawdown rate for a 65-year-old is 5%. The thinking here is that the typical costs of a living annuity come to about 2.5%, so as long as your investments are growing by more than 7.5%, your pension will increase each year and be sustainable for the rest of your life.

In order to work out how much capital you will need in order to retire, you would do the following:

  • Calculate your monthly expenses when you retire;

  • Work out what tax you’ll be paying when you retire and increase those expenses by the tax rate; and

  • Divide that number by 5%.


This will give you the capital needed to provide you with a sustainable income when you retire. Some examples can be found in the table below.

What I’ve shown you is a rough guide for how to calculate your retirement needs. I would strongly recommend that you speak to a financial adviser who is experienced in retirement planning.

They will have access to software that will help you structure your retirement income in the most tax-efficient way and be able to model your investments to ensure you get the right level of returns without risking your capital. DM

Kenny Meiring is an independent financial adviser. Contact him on 082 856 0348 or at financialwellnesscoach.co.za. Send your questions to [email protected]

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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