A statement showing R3 million cannot, by itself, say whether retirement is secure. The capital must be placed beside an after-tax spending plan and tested across different return and lifespan paths.
A retirement balance is a stock of money. Retirement income is a flow that must support spending month after month. Translating one into the other is where much of the planning work sits.
The same capital can support very different starting incomes depending on age, investment strategy, fees, inflation increases, tax, other income and how long the money must last. Withdrawing more early can improve today’s lifestyle but leave less capital to support later years. Withdrawing less protects the fund but may not meet real needs.
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List each retirement capital amount separately from each expected monthly income. For every income, note whether it is guaranteed for life, linked to investment performance, inflation-linked, temporary or uncertain.
Ask your advisor
- What initial income does the plan assume, and how will it change over time?
- Which portion is guaranteed and which could fall?
- What balance or income warning would trigger a review?
An illustrated retirement income is not automatically sustainable or guaranteed. The product terms and assumptions determine what it means.
Next: Contributions should not be an invisible source of optimism