How to work out your retirement savings number

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

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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 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.