20200611 How long it takes to get to a R10 million retirement – and how much you need to invest

Good day,

Achieving your long-term financial goals may seem overwhelming at the moment. However, by focusing on the factors you can control, and implementing small changes to your spending and saving habits, financial freedom is still within reach, notes Adriaan Pask, chief investment officer at PSG Wealth.

“Looking at the FTSE/JSE All Share Index (ALSI) so far this year, we see major rises and falls caused by events such as downgrades, a national lockdown and a global pandemic.

“However, when looking back over the long term, these major short-term drops don’t seem so severe. The S&P 500 drawn over 100 years shows that the only time investors would have received a negative 20-year return was during the Great Depression,” he said.

He said that if you allow yourself to get caught up in the news headlines and the everyday exposure of market volatility (especially as is the case at present with Covid-19), it can become all too easy to lose your nerve and change your strategy.

“This, more often than not, leads to investors selling high and buying low. Although it is important to keep track of your strategy and remain cognisant of market shifts, it is also imperative to remember that growing your money is a long-term commitment – a marathon and not a sprint.”

In the table below, scenario 1 shows that it will take about 45 years to reach an investment target of R10 million, at a growth rate of 10%, if you invest R1 000 per month.

However, if you double the amount to R2 000 per month, it will take you just 38 years to reach your goal. In other words, you’ll save for seven years less.

“This illustrates that even a small increase in your monthly contributions could help you to retire earlier or maximise on your investment returns,” said Pask.

Periods to reach R10 million capital at retirement

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