Retirement sounds like a dream, but for many South Africans, it can quickly turn into a financial nightmare.
Most of us have no idea how much we’ll actually need to stop working.
This guide breaks it down: the real costs, how your retirement income might compare, and the smart moves you can make today to retire with less stress.
How much do you need to retire in South Africa?
To retire comfortably in South Africa, you’ll likely need about 15 to 20 times your yearly salary saved up or invested. A good rule is to aim for enough money so you can live off about 4% of it each year without running out. For example, if you want a retirement income of around R25,000 a month, you’ll need around R7.5 million to R10 million saved and invested. The exact retirement savings amount depends on your lifestyle, health, factors like homeownership and debt, and how long you live.
How your income and expenses shape your retirement needs
The money you’ll need in retirement is all about balancing what you spend (costs) and what you earn or receive (income). If your income covers your lifestyle and unexpected expenses, you’re on the right track.
But if your income falls short, you may need to adjust your plan—either by saving more, working longer, or cutting down on expenses.
Most South Africans seriously underestimate both income and costs.
Costs
Three main cost categories:
- Living costs, like rent, groceries, transport, and electricity.
- Lifestyle costs, like hobbies, travel, entertainment, and gifts.
- Health costs, which often grow with age, think medical aid, chronic medication, and hearing or mobility aids.
On average, a single retired person in South Africa needs between R7,000 and R20,000 per month, depending on lifestyle, housing, and location. And since many South Africans live 20 to 30 years after retirement, the total cost can run into millions over a lifetime.
Plus, there are hidden and high-risk costs that can catch you off guard.
Extra hidden and high-risk costs:
- Outstanding debt, especially if you retire with loans or overdraft balances, and home, car, or credit card debt.
- Tax, you still pay tax in retirement if your total income exceeds the annual retirement tax threshold.
- Unplanned costs, like home repairs, health issues, or helping adult children financially.
Even if your monthly spending seems covered, surprise costs can tip the scales quickly.
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Income
Your income in retirement can come from different sources.
Retirement income sources:
- Employer pension: If you contributed to a workplace pension, this can give you a monthly payout.
- Retirement annuities (RAs): These are private retirement savings that pay out from age 55.
- Living annuities: After retirement, you can transfer some of your RA or pension into a living annuity and draw monthly income from it.
- Investments: Things like property rentals, unit trusts, or fixed deposits can provide extra cash flow.
- Family support: In some cases, adult children or extended family help with income.
- SASSA Older Person’s Grant: In 2025, this pays up to R2,180 per month if you’re 60 or older (R2,200 if 75+). But only low-income South Africans qualify.
So, how much is the average pension in South Africa? It’s hard to pin down, but estimates show most retirees receive less than R7,000 per month, and nearly half depend mostly on the state grant.
And what about taxes during retirement? Income from retirement funds like RAs or pensions is taxed like a salary.
You’ll pay tax if your total income is more than R95,750 per year (R148,217 if you’re 65+, and R165,689 if you’re 75+). This means many retirees pay little or no tax, but those with higher incomes should plan for monthly deductions.
Got a clear picture of what you’re up against? Let’s do some planning.
Retirement planning in South Africa
Good retirement planning means saving and investing early, choosing the right income strategy, and protecting your money from inflation and taxes. You should actively be thinking about how to save and invest for retirement.
Common retirement savings paths (and whether they’re enough)
Here’s a breakdown of the most common ways South Africans save for retirement — and what each path might realistically afford you in the long run.
Key:
- ❌ = Dangerous
- ⚠️ = Risky
- ✅ = Safe
- 🟡 = Be cautious
Real-life savings paths South Africans take:
- “I’ll rely on the state grant (SASSA-only)”
If you don’t (or can’t) save, the Older Person’s Grant will likely be your main income. It pays up to R2,180/month (in 2025). Which helps, but it is not enough for rent, food, and healthcare in most places. Retiring on a SASSA-only income isn’t enough.
Even if you own your home, you’ll still be dependent on family members and face a lot of financial challenges.
❌ Retiring on SASSA alone isn’t a comfortable or sustainable plan.
- “I’ve contributed to a workplace pension”
This can be a strong foundation, but only if you have contributed consistently over many years. Job changes and early withdrawals can shrink your final payout more than most people realise.
Even with a pension, it’s smart to save and invest separately. And if you’re planning to live on pension income alone, owning your home becomes critical, especially with rising rental prices in urban or coastal areas.
⚠️ Retiring on a pension-only can still be very risky, particularly without homeownership.
- “I’ve got a retirement annuity (RA)”
RAs are private retirement savings tools with tax benefits and long-term growth potential. Pairing an RA with a workplace pension can give you more reliable income later on.
South Africans who invest steadily in RAs — especially those who also have a pension and own their homes — are often in a much stronger position to retire comfortably.
✅ Pairing an RA with a pension and homeownership is a smart strategy to retire comfortably.
- “I invest and save on my own”
If you’re self-employed, freelance, or just prefer managing your own money, this route can work — but it takes discipline and planning. Common options include unit trusts, ETFs, rental property, or fixed deposits.
Just keep in mind: you’ll need to self-manage your withdrawals and protect your savings from inflation. Without structured products like annuities, the risk of running out of money is higher unless you’re very intentional.
🟡 Without a clear plan, it’s easy to mismanage the DIY approach. It can work, but you’ll need discipline and structure. To offset the risk, try to save and invest 20–30% of your current income if possible.
⭐ Related content:
Big risks most South Africans face
- Under-saving
- Early withdrawals
- Overestimating SASSA
- Rising inflation
Under-saving: Only 6% of South Africans can retire comfortably, according to the National Treasury. That means 94% may need to keep working, rely on family, or drastically cut costs.
Early withdrawals: Many people withdraw retirement savings when changing jobs, which shrinks their final payout, attracts tax penalties, and loses years of compound growth.
Overestimating SASSA: The Older Person’s Grant helps, but R2,180/month isn’t enough to cover essentials like food, rent, and medical aid.
Rising inflation: Costs like healthcare, rent, and food increase faster than general inflation. Over a 20–30 year retirement, this can cut your buying power in half — or worse — if your income doesn’t grow with it.
Even with a pension or annuity in place, underestimating these risks can leave you short. Plan for a longer life, rising costs, and multiple income sources, not just one.
What is your estimate? *The calculation is an estimate actual amounts may vary. What is your estimate? *The calculation is an estimate actual amounts may vary.
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The danger of inflation
Inflation slowly eats away at your buying power. What costs R1,000 today might cost over R2,000 in just 15 years. If your income doesn’t grow with inflation, your lifestyle will shrink — even if you saved “enough.” Medical aid, food, and rent are some of the fastest-growing expenses for retirees.
Here’s what inflation can do over time:
| Monthly expense today | After 10 years (6% inflation) | After 20 years (6% inflation) |
| R5,000 | R8,954 | R16,020 |
| R10,000 | R17,908 | R32,041 |
| R15,000 | R26,862 | R48,061 |
*Based on compound inflation of 6% per year
Long story short: if your retirement income doesn’t grow, inflation will shrink it for you.
How to boost a comfortable retirement by paying off debt early on
Debt in retirement is a double cost that shrinks your income and inflates your monthly expenses. Paying off your debt before you stop working gives you more breathing room and less financial pressure later on.
Why it matters:
- No debt = lower income needs
- Frees up cash for savings, healthcare, or emergencies
- Reduces pressure on annuities or investment drawdowns
For example, settling your home loan before 60 could save you R8,000–R20,000/month (or more). Clearing car or credit card debt helps, too, especially when you’re living on a fixed income.
How to do it:
- Start by listing all your debts and prioritising high-interest ones first (like credit cards or personal loans).
- Use a snowball or avalanche repayment strategy.
- Consider debt counselling if repayments are overwhelming — it can help restructure payments legally and protect your assets.
- As your income grows, increase repayments instead of your lifestyle. The more you pay off while you’re still earning, the more freedom you’ll have later.
Think of it as buying your future self some peace of mind.
Final thoughts
There you have it — the real cost of retiring in South Africa, and what it takes to make it work.
Start by reviewing your current savings, trimming debt, and thinking through your income mix. A few smart choices now can mean years of financial freedom later.
Plan ahead and stay consistent. Your future self will thank you.
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