Work on a 75% replacement ratio
According to Alex Forbes Research, a 75% replacement ratio is a reasonable target for most members when it comes to their retirement. It’s important to remember that contributions of 17% of one’s salary over a 40-year period should be made to achieve this goal. This means that for every R1,000 that one earned before retirement, they are aiming to replace with an income of R750.
The exact circumstances of each individual will affect the target replacement ratio. For instance, if one has a family with a high income, their target replacement ratio might be higher than 75%. However, according to a report released by Alexander Forbes Member Insights, only 31% of South Africa’s income-earning population can retire with a savings of more than 38%.
When it comes to setting goals for retirement, it’s important to remember that the higher the contribution rate, the more likely it is that one will be able to achieve the target replacement ratio. For instance, if one starts contributing 17% of their salary to their retirement fund at 40, they might be able to achieve a 38% replacement ratio.
