Question:
Hi, I alot of the advice here is sound, however, it might just be that I do not understand the concepts well enough, but the calculator "Tools" you have on this site are not very user friendly (for me). Do you not have a calculator that can determine my required monthly retirement annuity contribution as well as the percentage it should increase annually IF .. for example: I have zero pension plans of any sort. I am 33 and wish to retire at 58 and hope to have a total savings of R5mil at that stage in my RA.. What must my contribution bestarting now (using 10x as my 'advisor')
Answer:
MAK, Your problem has no single correct answer. If you do not define your initial contribution and the annual growth in your contribution then any number of combination of these two variables can get you to R5m at age 58. Our calculator relates the savings goal to your income and the desired replacement ratio. Only in this way can you derive a savings goal that is meaningful, because it is related to your accustomed standard of living.
What will R5m be worth when you turn 58? What is is its purchasing power then, and what annuity will it afford you? We don't know because we don't know what future inflation will be, so stating your goal in this way is not helpful. However, assuming you want to save R5m in today's money, you can use the Calculator to work this out. Enter the inputs (age, salary etc). Put in a nominal savings rate, say 10%, and hit Calculate. The Calculator assumes that your salary will grow by 1% in real (after-inflation) terms every year. On the Results page, tick the "Investment Value" circle. Now move the "Savings" slider on the right, until the Investment value is around R5m, and you will have an idea of how much you need to save every month (R8 000 pm, growing at 1% pa in real terms, assuming you own the 10X default glide path portfolio, paying our low fees).
This number is not guaranteed of course as future market returns are unknown. Our Calculator is based on historical returns over the past 113 years. If the R5m goal is out of reach of the slider, you need to go back to the Input screen and adjust the savings rate (up or down) so that the slider range allows you to reach your R5m savings goal.
