This is one of the most asked questions on the internet, 10 million Rands is a lot of money. But is it really enough to last you throughout your retirement? There are a few factors that you have to take into account before deciding if money is enough to retire with.
The average retiree in South Africa retires on R1.8 million, contrast this with 10 million. R10 million is more than enough money to retire with for the average person but your lifestyle and responsibilities affect the amount of money that you need to retire.
Age of retirement
The age of retirement in South Africa is 60 years. The average life expectancy in South Africa is 63 years. However, this is just the average, which is heavily influenced by people from impoverished backgrounds. People that lead a healthy lifestyle can expect to live to age 75 and 80.
This means that you would have between 15 to 20 years to spend your money, there is a possibility that you might live up to 90 years. 10 million Rands should be able to provide you with a comfortable lifestyle for most of this time. You can spend over R40 000 per month for a period of 20 years before your cash runs out.
However, there has been a trend of people choosing to retire early in South Africa. This is a trend that is seen mostly among wealthy people. Retiring in your 30s with 10 million rand might not be enough. You would have roughly 45 years to spend that money. Assuming that you will live up to age 75, you would need to spend just R220 000 per year. Which translates to R18 518 per month.
That’s still a lot of money, 97% of South Africans make less than R15 000 per month. R18 000 per month can go a long way if your mortgage is paid up and you live a slightly frugal lifestyle. The best thing with having R10 million is that you can invest the other money and only take it out when you need it. It would take you roughly 5 years to eat the first million. You can invest the other R9 million during that time, it would earn you more money. R9 million invested for a period of 5 years at African Bank would earn you an interest of R5 million, would you have roughly R14 million at the end of the period.
Lifestyle
R10 million is a lot of money and can sustain most extravagant lifestyles for a period of time. However, your money can quickly run out if you make big purchases, this is how most lottery winners lose their money. From our example above, it would take you roughly 5 years to finish R1 million if you were to retire at age 30.
However, some people choose to buy exotic cars that are worth R2 million, that’s taking away 10 years’ worth of your living money. This is not a wise thing to do if you are still looking to live for roughly 45 years. Big purchases and endless expenditure on things like clothes and entertainment may eat most of your money.
All you have to do is maintain a strict discipline, don’t spend more than you have to per month. It’s important to note that cost of living will rise as time goes on, R18 000 might not be worth as much in 45 years. In fact, at this rate of inflation; bread will cost of R70 in 40 years’ time.
Conclusion
10 million rand is definitely enough to retire on as long as you remain disciplined. Do you have any thoughts or questions? Comment below.
