New tool: how much do you need to retire, an honest retirement calculator

Personal Finance
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A lot of people asked me for a retirement 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 built one that does not do any of that.

It works everything in today’s money, takes income tax off so the figure you see is what you could actually spend, and shows you in plain rands what fees are costing your final pot. No sign up, no salesperson at the end.

There are two tabs.

Am I on track? is for while you are still working. Put in your age, what you have saved, what you save each month and the income you want, and it projects your pot, shows the after tax income it would give, and if you are short it tells you in one line how much more to save each month to fix it.

Will my money last? is for when you are at or near retirement. Put in your pot and the income you want, and it tells you roughly the age your money would run out, whether your drawdown is in the safe range, and how a guaranteed annuity for life would compare with staying invested in a living annuity.

Two honest things it does that the insurer tools do not.

First, it grosses up the tax. Your retirement income is taxed like a salary, so to spend R25,000 a month you have to draw closer to R29,000 before tax, which means you need a bigger pot than the usual 25 times rule suggests. It shows you both numbers, the rule of thumb and the realistic after tax target, so you plan against the real one.

Second, it puts a rand figure on fees. An extra one percent a year in fees can quietly cost you a large slice of your final pot, often enough to fund several years of retirement income, and it is one of the few things you can actually control.

Try it here: Retirement Calculator South Africa: How Much You Need

It is general information to help you plan, not financial advice. I would be glad to hear whether the numbers match what you are seeing from your own fund, and whether anything is missing that would make it more useful.

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Perfect timing as I am just doing some belated planning. For actual annuity quotes with life annuity dependent on actuarial modelling (age, health etc) this site seems to maintain comparative numbers from various providers and products (many options). Masthead | Annuity Rates v2.0 . There is also whether compulsory or voluntary funds are used.

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This is genuinely useful, thank you for building something that doesn’t hide the fees. In my HR work I sit with people in their forties who get a shock when they realise the projection their fund gave them was before tax and before the platform takes its cut, so a calculator that shows the real number is doing people a real favour.

The Annuity Rates link is a good shout too, especially the compulsory versus voluntary distinction, because that catches a lot of people out. One thing I’d love to see, if it’s not already there, is some way to model the difference between a living annuity and a guaranteed one. So many colleagues default to a living annuity without understanding the longevity risk they’re carrying themselves. Does your tool let you stress test a few return scenarios, or is it a single assumption?

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Thanks Thandi, that means a lot, and your HR view is exactly the shock I was trying to soften. The before tax, before fees projection catches almost everyone.

Good news, the living versus guaranteed comparison is already in there. The “Will my money last?” tab puts them side by side, how long a living annuity lasts at the income you pick, against what an inflation linked guaranteed annuity would pay for life, so you can show a colleague the longevity risk in actual rands instead of in the abstract.

On stress testing, it is not a full Monte Carlo, but it is not a single guess either. The growth chart shades a worse and better band, returns about 2% either side of your assumption, and you can change the return and fee numbers yourself and watch it all redraw. The compulsory versus voluntary point is a good one too, I will have a think about how to work it in without cluttering things. Cheers.