Retirement planning

[TheOracle]

People asked me for a retirement planning calculator, and my first thought was that there are already plenty out there. The trouble is that almost all of them belong to a bank or an insurer, so they are built to capture your details, and they keep the maths simple and flattering. They use one fixed return, ignore the tax you will pay on your pension, and quietly leave fees out. So I build one that does not do any of that:

Retirement Calculator South Africa: How Much You Need

How much do you need to retire in South Africa? See if you are on track, in today's money and after tax, with fees shown and a living-versus-guaranteed annuity view. No signup.

southafricafacts.co.za

 

[handyman007]

Yes, I like this calculator.

 

[geezer]

Unless I am doing something wrong, there's something off with this calculator.

I used a hypothetical scenario but was in line with my own situation. When I was 60 years old, I had roughly about R10 500 000 in my pension fund. That would have given me ±R65 000 per month, and ±R44 000 per month after tax. I went on pension just after I turned 61 the next year.

I put those values into the calculator, but it indicated that I needed to pay in an extra R717 733 per month to achieve a goal of getting R44 000 per month after tax. That extra per month would have added an extra R8 612 796 (excluding any interest gained)to my existing R10 500 000 making a total of R19 112 796. That amount would have given me more than R120 000 before tax deducted, which probably would have been roughly R75 000 after tax. This is almost double the targeted monthly income of R44 000 after tax.

 

[chrisc]

Change the assumptions, then you will see a more accurate forecast

 

[BrotherTheresa]

Basically, this calculator confirms I am faaarked.

 

[TheOracle]

Unless I am doing something wrong, there's something off with this calculator.

I used a hypothetical scenario but was in line with my own situation. When I was 60 years old, I had roughly about R10 500 000 in my pension fund. That would have given me ±R65 000 per month, and ±R44 000 per month after tax. I went on pension just after I turned 61 the next year.

I put those values into the calculator, but it indicated that I needed to pay in an extra R717 733 per month to achieve a goal of getting R44 000 per month after tax. That extra per month would have added an extra R8 612 796 (excluding any interest gained)to my existing R10 500 000 making a total of R19 112 796. That amount would have given me more than R120 000 before tax deducted, which probably would have been roughly R75 000 after tax. This is almost double the targeted monthly income of R44 000 after tax.
View attachment 1929386

Thanks for pointing this out. You found a genuine bug, just fixed and pushed live.

What was happening: on the "Am I on track?" tab, if you put in an age that's the same as (or past) your retirement age, the calculator quietly bumps the retirement age up by one year rather than telling you. With only a one year runway, the "how much extra to save" math was dividing your shortfall by a tiny one year window, which is what spat out that crazy R717k a month figure. It's now been changed so that when there's only a couple of years left, it stops pretending "save more a month" is a sensible answer and just tells you straight what your pot supports and what your real options are (retire a bit later, draw less, top up with a lump sum, or get a guaranteed annuity quote). If you're already at or basically at retirement age with a lump sum sitting there, the "Will my money last?" tab next to it is the one built for that, worth trying your numbers there instead.

On the R19.1m should give R75k point, that one's not a bug, just a more cautious assumption than the flat 4% rule. The safe withdrawal rate drops as your horizon gets longer since your money has to last more years, so at a 34 year horizon it's using about 3.5%, not 4%. That's deliberately conservative, not a miscalculation.

You may need to refresh your browser to get the latest code.

 

[Splinter]

Change the assumptions, then you will see a more accurate forecast

His assumptions are in line with the scenario he presented?

Regardless, no change in assumptions will rectify the calculator calling an extra R717,773 a month, "close, but short".

 

[Splinter]

Basically, this calculator confirms I am faaarked.

As per geezers post, the calculator may be borked

 

[etienne_marais]

Basically, this calculator confirms I am faaarked.

Me too

 

[BrotherTheresa]

As per geezers post, the calculator may be borked

Think my retirement savings are borked...

 

[Jehosefat]

Unless I am doing something wrong, there's something off with this calculator.

I used a hypothetical scenario but was in line with my own situation. When I was 60 years old, I had roughly about R10 500 000 in my pension fund. That would have given me ±R65 000 per month, and ±R44 000 per month after tax. I went on pension just after I turned 61 the next year.

I put those values into the calculator, but it indicated that I needed to pay in an extra R717 733 per month to achieve a goal of getting R44 000 per month after tax. That extra per month would have added an extra R8 612 796 (excluding any interest gained)to my existing R10 500 000 making a total of R19 112 796. That amount would have given me more than R120 000 before tax deducted, which probably would have been roughly R75 000 after tax. This is almost double the targeted monthly income of R44 000 after tax.
View attachment 1929386

Looks like it's using the 4% annual draw-down assumption which is a base assumption for the money to last somewhat indefinitely even with inflationary increases in annual draw down. It's a pretty conservative assumption. If you only need it to last for a set amount of time, you can draw down faster.

 

[Splinter]

Me too

It's scary how much one needs to retire "comfortably". Which is why you must start saving as early as possible!!! Compounding is not just your friend, but the best long-time lover you will ever have.

But ja, this message is repeated a dozen times a year through various media, but people will still rather buy that flash car and splurge their retirement funding when moving jobs.

 

[Splinter]

Think my retirement savings are borked...

That's why they say only 6% of Saffers will be able to retire comfortably. Refer my above post

 

[chrisc]

It also assumes that your initial money supply increases by a fixed percentage
There are many investment opportunities that beat inflation year on year

 

[Smiggles]

People don't retire anymore they die on the job.

 

[Splinter]

Thanks for pointing this out. You found a genuine bug, just fixed and pushed live.

What was happening: on the "Am I on track?" tab, if you put in an age that's the same as (or past) your retirement age, the calculator quietly bumps the retirement age up by one year rather than telling you. With only a one year runway, the "how much extra to save" math was dividing your shortfall by a tiny one year window, which is what spat out that crazy R717k a month figure. It's now been changed so that when there's only a couple of years left, it stops pretending "save more a month" is a sensible answer and just tells you straight what your pot supports and what your real options are (retire a bit later, draw less, top up with a lump sum, or get a guaranteed annuity quote). If you're already at or basically at retirement age with a lump sum sitting there, the "Will my money last?" tab next to it is the one built for that, worth trying your numbers there instead.

On the R19.1m should give R75k point, that one's not a bug, just a more cautious assumption than the flat 4% rule. The safe withdrawal rate drops as your horizon gets longer since your money has to last more years, so at a 34 year horizon it's using about 3.5%, not 4%. That's deliberately conservative, not a miscalculation.

You may need to refresh your browser to get the latest code.

I've been reading about retirement planners extending the horizon (length of time you are expected to live after you retire) more and more, but if say you retire at 61 that still takes you to 96. Based on all these celebrity deaths, early eighties seems to be a lotto win.

I don't think I will hit 90's for sure. Nor, I think, do I want to. Can your calculator allow you to put your own "horizon" number in?

 

[geezer]

Thanks for pointing this out. You found a genuine bug, just fixed and pushed live.

What was happening: on the "Am I on track?" tab, if you put in an age that's the same as (or past) your retirement age, the calculator quietly bumps the retirement age up by one year rather than telling you. With only a one year runway, the "how much extra to save" math was dividing your shortfall by a tiny one year window, which is what spat out that crazy R717k a month figure. It's now been changed so that when there's only a couple of years left, it stops pretending "save more a month" is a sensible answer and just tells you straight what your pot supports and what your real options are (retire a bit later, draw less, top up with a lump sum, or get a guaranteed annuity quote). If you're already at or basically at retirement age with a lump sum sitting there, the "Will my money last?" tab next to it is the one built for that, worth trying your numbers there instead.

On the R19.1m should give R75k point, that one's not a bug, just a more cautious assumption than the flat 4% rule. The safe withdrawal rate drops as your horizon gets longer since your money has to last more years, so at a 34 year horizon it's using about 3.5%, not 4%. That's deliberately conservative, not a miscalculation.

You may need to refresh your browser to get the latest code.

Thanks, it looks like it's giving more credible results. Although the calculator indicates that I will get only about R37 000 (after tax) upon retirement, whilst I actually am getting ±R45 750 after tax. Maybe I should play around with the assumptions.

 

[Splinter]

People don't retire anymore they die on the job.

I dunno hey - many companies have mandatory retirement ages. It's when you don't have enough to live on, after retirement, that you need to scramble to find some sort of work. And carry on until you die, because you can't afford to stop working.

 

[Splinter]

Thanks, it looks like it's giving more credible results. Although the calculator indicates that I will get only about R37 000 (after tax) upon retirement, whilst I actually am getting ±R45 750 after tax. Maybe I should play around with the assumptions.

On this point, do you have a living annuity, or a life (guaranteed) annuity? The values will differ.

Edit: @TheOracle - your calculator is aimed at purchasing a living annuity, I assume?

 

[BrotherTheresa]

That's why they say only 6% of Saffers will be able to retire comfortably. Refer my above post