Retirement Planning: A Young Person’s Guide to a Secure Future

You’re in your early 20s, and retirement feels like a lifetime away. But here’s the secret: **starting early is the key to a comfortable, stress-free retirement**. Even small steps now can grow into millions by your 60s, thanks to the magic of compound interest.

Phase 1: Why Starting Early is Critical

• Longer Time to Grow: Money saved in your 20s grows exponentially. R200/month started at 25 could be ~R1.2 million by 65; starting at 35, it’s only ~R400,000. Time is your biggest asset.
• Less Stress Later: Early savings mean smaller contributions in your 30s and 40s, leaving more money for big life events (like buying a house or raising kids).
• Financial Independence: A solid plan lets you retire on your own terms, not relying on family or government grants.

Phase 2: Core Retirement Products in SA

South Africa offers specific, tax-efficient products for retirement:

Phase 3: The Practical Retirement Plan

1. Determine Your Goal

• Aim for an income that is 75% of your final working salary, adjusted for 40 years of inflation. A R15,000/month lifestyle today might require R50,000/month in 2065.
• **Action:** Use an online retirement calculator (available on major financial provider websites) to project your savings needs.

2. Start Small, Increase Gradually

• Even R100 or R200 per month matters at 20. The early contributions do the most work.
• **Action:** Commit to increasing your retirement contribution by at least 10% annually or every time you receive a salary raise.

3. Keep Fees Low

• Fees, even 1-2%, can erode hundreds of thousands of Rands over four decades.
• **Action:** Aim for total fees below 1.5% for RAs and below 1% for employer pension funds. Low-cost ETFs are often the best choice for this.

4. Diversify Your Investments

• **Rule:** For young people (20s/30s), your investments should lean heavily toward high-growth assets (like stocks or equities, often via an ETF) for maximum long-term growth.

5. Review Annually

• **Action:** Once a year, check your fund’s performance, confirm your contribution amount, and ensure you're still on track for your goal.