How Much Should You Be Saving for Retirement?

This is the question everyone eventually asks, and there's no single correct answer — it depends on your age, your income, when you started, and what kind of retirement you're aiming for. What exists instead is a widely used starting guideline, worth understanding for what it is: a rule of thumb, not a personalised target.

The "save around 15% of income" guideline

A commonly cited rule of thumb in personal finance, including in South Africa, is to save roughly 15% of your income toward retirement over your working life, including any employer contribution to a workplace fund. This is a general convention, not a South Africa-specific statutory figure or a guarantee of a comfortable retirement — treat it the same way you'd treat the 50/30/20 budgeting split from the Budgeting module: a reasonable starting point to adjust from, not a rule to follow blindly.

Why a flat percentage doesn't fit everyone

The 15% guideline assumes a fairly standard career length and a fairly standard retirement age. It fits less well if:

• You're starting later — someone beginning retirement saving at 40 needs a meaningfully higher percentage than someone starting at 25, because there are fewer years left for lesson 1's compounding to do the work.
• You want to retire earlier than the standard age, which shortens your saving years and lengthens the number of years that saving needs to fund.
• Your income is irregular, which is common enough in South Africa that a fixed percentage may not be practical every single month — a average contribution rate over a year can matter more than hitting the exact figure monthly.

A better check than the rule of thumb alone

Rather than relying purely on a percentage, the more reliable approach is to work backward from what you'll actually need: your desired monthly income in retirement, adjusted for inflation, for however many years you expect to be retired, minus whatever guaranteed income sources you'll have (a state grant, a guaranteed annuity). That's a genuinely personal calculation, not a percentage that applies equally to everyone.

The final lesson in this module looks at what happens on the other end — how the lump sum portion of your retirement fund is actually taxed when you get there.