How much should you be saving towards your pension every month?
When you are 20, planning for your pension is not something that is naturally at the top of your mind, but is is something that should be. Studies have shown that those that start saving for their pension from their early twenties, definitely reap the benefit in their later years – that is the beauty of compound interest. There are three options you can consider when choosing a pension option to suit your needs. These are:
- The provident fund
- The pension fund
- The retirement annuity
Understand your benefits
Not many people are aware of the fact that in order to encourage long-term planning and saving, the South African government encourages the public to save for retirement by allowing us to deduct up to 27.5% of our retirement contributions from our pensionable income. When it comes to planning for your retirement, there are no set rules applicable to retirement savings, but as a thumb-suck one should try and put aside 15% of your earnings from as early an age as possible in order to have sufficient capital to retire. It’s usual to target 75% of your earnings at retirement age as a reasonable goal, and to achieve this it’s vital to start saving as early as possible.
Old Mutual make working out how much you should be saving towards your pension each month easy with their Retirement Calculator.