Saving for Retirement

Saving for retirement is one of the most important financial decisions you can make. It is never too early or too late to start planning for your future. Retirement planning is all about ensuring that you have enough financial security to live comfortably when you retire.


According to a recent survey by Sanlam Benchmark, only 6% of South Africans will be financially independent when they retire. This is concerning and it highlights the importance of saving for retirement. The earlier you start saving, the more time your money has to grow, and the more comfortable your retirement will be.


One of the biggest advantages of saving for retirement is the power of compound interest. Compound interest allows you to benefit by earning interest on the principal amount as well as interest on interest accumulated over time. This means that the longer you save, the more exponentially your money grows.


Another compelling reason for retirement savings is the tax benefits that come with contributions to retirement funds. Taxpayers can get a tax deduction of 27,5% of taxable income, subject to a maximum contribution of R 350,000 per tax year. The current tax year ends on 29 February 2024, make sure that you obtain the maximum allowable benefit and if necessary, make an ad hoc top up to your retirement fund before the tax year end.


Assuming you save R10,000 a month from your salary and invest all proceeds in the Ninety-One Opportunity fund. The graph below illustrates over a 15-year period, the difference between saving normally or saving through a retirement annuity and receiving the tax deductibility benefit.


The tax deduction benefit of the contributions to your retirement could improve your financial position by as much as 88% over a 15-year period. This additional growth translates directly to your retirement ‘nest egg’ longevity. i.e. more money for longer.


Healthy retirement savings help you maintain your standard of living after you stop working. Retirement is expensive, and you need enough money to cover your living and medical expenses. By saving for retirement, you ensure that you have a steady flow of income to maintain your current lifestyle.


It is important to remember that retirement planning is unique to each individual and is not a one-size-fits-all solution. Retirement plans should be tailored to your specific needs and goals. A financial advisor can help you develop a personalized retirement plan that takes into account your current financial situation, your retirement goals, and your risk tolerance.


Saving for retirement is an essential part of financial planning. It is never too early or too late to start planning for your future. By starting early, capitalising on compound interest, and developing a personalized retirement plan, you can ensure that you have sufficient financial investments to live comfortably during retirement.


Make an appointment with an Activ8 advisor to review your retirement savings plan and strategy before the end of the tax year.