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| 7. Advantages of Investing Early for Your Retirement |
- If you plan to retire at age 65, you need at least 10 times your annual salary at that time (15 times would be better). Retire ten years earlier, and you'll need a lot more.
- If you don't have a company pension, you should set aside at least 15% of your gross income for retirement. And probably more. Many company pension schemes ask employers to contribute 7% and the company makes an equal contribution.
- Starting early makes a tremendous difference. Take Liesl and David, both the same age, who want a nest egg at age 65.
- Liesl starts saving at 30. She invests R10 000 each year for 10 years, then stops - but lets her unit trust investment continue to grow.
- David, the procrastinator, only begins when he is 40. He invests R20 000 each year (double Liesl's contribution). By age 65 he has invested R500 000 more than Liesl. Both invest in the same unit trust, which grows at 12% p.a.
- Amazingly, at age 65, Liesl's nest egg is worth more than David's. But that's not all. Even if David continues investing R25 000 p.a. until age 90 (a further R625 000) his nest egg would still not be as large as Liesl's!
- Here's more proof. Assume you want an additional R600 000 when you retire. Start saving 25 years before retirement and you must invest R370 a month growing at 12%. Wait until 10 years before retirement and you will have to save R2 740 each month.
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