Share Forum - Discuss JSE shares and join the Investor Challenge

Per my own personal experience and having worked for 40 years any figure resembling 22% to 25% of after tax salary will allow you to live comfortably for a substantial number of years after retirement, but once on retirement you will need to address you expenses and cut out those that are not necessary - so even in retirement you need to be sensible with your expenses. However it is important to build up a portfolio of investments over and above your pension commitments - this portfolio becomes your wealth creator whilst your pension sustains your lifestyle

I think the best answer here is "as much as you can". Do you get any type of matching in terms of a pension fund etc, and if so can you up the % you contribute?

Also if you haven't maxed out an RA between you and your company (27.5% of gross salary allowed) do so. Not paying tax on all that money will mean you in effect save more for less. If you're in the upper tax brackets that'll be a huge boost!

I'm probably a lot more frugal than most, I've pretty much had 50% of my take home pay automatically invested every month. Initially into my bond, then a unit trust, and now ETFs. It's meant I've felt poor on occasion, as the money was taken out in the beginning of the month, so I just had to live on the rest, but it's also meant I avoided the excess of new cars and luxurious houses.

But I can see where you're coming from though, things are definitely tightening up. My annual increase was only 4%, significantly lower than the current real inflation. I'm running out of things to trim spending on!

Maybe consider some other life stages when setting out your investment or wealth goals - it is advisable to work on 5 year cycles and reassess at each term end. I built myself a spreadsheet when I retired in 2005 recording my then current wealth and then determined what my goal was 20 years on. I then worked backwards (annual milestones) to 2005 to work out how hard I had to get my portfolio to work annually to achieve the end goal. The end goal needs to be realistic and you also need to understand that though you may achieve your milestones consistently you need to factor in what is happening with our currency.
In terms of earning capacity you will find that your greatest earning years are between 40 and 50 years but if you have a family and kids your earnings will be eaten up with their needs. Then from about 50 onwards your company will start averaging down your salary and increases could be below inflation, but if your kids are no longer a drain on your income its the best time to build wealth, as you disposable income is considerably more.
I am not a great believer in RA's especially the poor performers that were available in my thirties and to say that I am disappointed with my RA is a mild statement.
Further when you get a level of comfort financially you may want to look at your insurance - life cover specific - I found that on my life cover (cover incremented with inflation) that the monthly premiums escalated more than inflation so you were paying more for less cover. I cancelled all of my live covers and sunk the funds into mutual funds (all higher risk units) as my RA then equated my life cover.
I am an emphatic believer that one should never commute any portion of one's pension as this will prove to be detrimental later on in life and is likely to start biting you quite severely when you get to about 75.
I started work in '67 and from these early days and had 2 objectives - 1) ensure that one has a good pension and contribute extra if permitted to ensure that you can continue your lifestyle on retirement into retirement and, 2) build up an investment portfolio which sits atop your pension and doesn't need to be dipped into to meet monthly or annual living expenses
So wealth means many things to many people but achieving wealth is hard work and being savvy with your investments, but more importantly setting goals (and revising them, and setting new ones fairly regularly) and having milestones and monitoring these achievements regularly