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The Impossible Task of Pensions

Relying on your pension fund in retirement will more than likely not be enough.

Andrew Padoa




Majority of people have chronically under-saved for retirement. This may be a result of not saving enough, starting to save too late, or using pension money to purchase cars or furniture instead of preserving the capital when resigning from employers. We need to save more for retirement or be prepared to work into our 70s.

Continuing your lifestyle

Let us take a look at an example to explain why pensions will not be enough to support our lifestyles in retirement.

Greg is 25 years old, earning R 8 000 a month and saves 15% of his income until he retires at age 65. Let us assume his investment grows at 10% per annum and his salary increases at inflation (assumed to be 6% over the long term).

Should Greg wish to receive a monthly after tax income of R 8 000 per month in today’s terms at retirement, his capital is likely to last until age 81. This does not seem too bad, but the major concern with this is that R 8 000 per month will probably not be sufficient for Greg as he would like to have a higher standard of living in retirement. If Greg wanted R 12 000 per month in retirement in today’s terms, his capital is only likely to last until age 73.

Focused on different channels

The above scenario is unfortunately something that will become more and more common in the future. People are living a lot longer and have saved nowhere near what they should have in order to support their lifestyle in retirement.

The above scenario also points out that you cannot solely rely on your pension fund for retirement income. We need to save more in our personal capacity to ensure that our money can support our lifestyle for a significant period of time.

To assist your capital to last longer, you could do the following:

  • Work beyond the ‘normal’ retirement date of age 65, perhaps working until age 70. This will not only allow your investments an extra 5 years of compound growth, but it will also reduce the amount of years in retirement you will need to draw from your investments.
  • Start saving MORE for retirement. Thereby having a larger investment portfolio to live off in retirement.
  • Cut out unnecessary expenses in retirement where possible Reduce your income needs in retirement as much as possible. The less income withdrawn from your investments, the longer your portfolio is likely to last.
  • Allocate more of your investments to growth assets (shares and property) during your accumulation phase, in order to achieve returns in excess of inflation. Ensure that you understand the risk or volatility that comes with this.

Andrew Padoa CFP ®

BCom Financial Management (UNISA)

Post Grad Diploma Financial Planning Law (UFS)

*** Consolidated is a national financial planning practice with offices inWestern Cape,Johannesburg,Tshwane,Eastern CapeandKwaZulu-Natal.  Andrew is based in KwaZulu Natal.

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1 Comment

1 Comment

  1. Clive

    Mar 15, 2013 at 09:57

    Hi Andrew, while I agree with the general premise of the article (i.e. that pension funds face an impossible task and people need to save more) your logic has an error in it. The higher standard of living in retirement that you use to justify Greg wanting R12k at retirement is only really realistic if Greg received higher than inflation salary increases (i.e. these higher living standard expectations normally coincide with those who have been receiving those same living standards during their working career – it’s not as though the average person suddenly gets to retirement and then decides he/she wants the finer things in life). In the case of the 12k retirement, the salary increases should be above inflation.

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Personal Finance

10 Tips To Become A Millionaire This Year

Becoming a millionaire requires changing your mindset and implementing some changes.

Murray Newlands



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Becoming a millionaire may seem out of your reach, but it’s possible with the right attitude and guidance. The fact of the matter is your income can only grow as quickly as you do, so you need to change your mindset to achieve your goal of becoming a millionaire.

Once you have a millionaire mind, you can’t lose it, no matter what financial or business mistakes you make along the way. To get yourself there, you’re going to need some structure. To help you, I’ve outlined the top ten tips you should follow to become a millionaire this year.

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Personal Finance

If You Think These 5 Things, You’ll Never Get Rich By The Time You’re 30

Five common mistakes entrepreneurs make when starting a business and how to correct them.



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Last week, I had lunch with a millennial who wanted some advice about a business he’s starting. After the usual small talk, we got down to discussing his business plan. Within a short time, it was clear that his business idea was great, his plan for executing was fairly solid and he had gathered together a strong team to help him make it happen.

So far, so good. But, to be frank, this guy has no chance of being successful with his current mentality. What it takes to be rich (or successful in any measure) has a lot more to do with your mindset than your ideas and plans.

From the time we started in business at the ripe ages of six and seven, our Grandpa Joe taught my brother Matthew and me many lessons about the details of running a profitable business. Over the years, we learned about how to create a business plan; how to market our products and services; and how to take care of customers, vendors and employees. All this knowledge has been invaluable to us in creating and running successful businesses. But, what our grandfather taught us about attitude and mindset trumps all other lessons.

Without calling out the specific individual I spoke with recently, below are five “hypothetical” attitudes that will get you nowhere in your journey to success – and the attitudes that should replace them.

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Personal Finance

5 Habits That Lead To Millionaire Business Success

You need the right habits if you’re going to succeed.

Timothy Sykes




What do all millionaire businesspeople have in common? Well, a lot of things.

I found from a recent study that 80 percent of all millionaires still go to work every single day. They’re working people just like me. But, they have to keep themselves in work or it all grinds to a halt. So what are the habits you need to make your business a success?

1. Patience

Nothing is ever going to come easy. You can look at the likes of Steve Jobs and Bill Gates, as well as the other usual suspects, to realize that success didn’t come with their first venture. Many of them failed time and time again. It took patience for them to become successful.

I read an article recently about 36-year-old teacher Andrew Hallam who became a self-made millionaire on a teaching salary. But, in his spare time he invested smart and lived frugally.

It proves you don’t have to inherit lots of money or become an instant success to make a millionaire business.

Related: 4 Ways To Become A Millionaire Even When You Start With Little

2. Dedication

You have to be dedicated to your craft if you’re going to become successful. Going back to Bill Gates again, he started his business in the back of his garage. Now that’s dedication.

It’s what I tell all my students. If they’re not dedicated to this, then they should leave. You need to be able to push through the barren periods if you’re going to reach the oasis of success.

3. Ambition and big dreams

Have you ever heard the quote, “Shoot for the moon. Even if you miss you’ll land among the stars”?

I take that to heart because even if you aim to become a billionaire and miss you still might be a millionaire many times over. Take the Wright Brothers as an example. Not content with creating a successful glider in 1902 they went on to create the world’s first airplane in 1903, making four brief flights in Kitty Hawk. It demonstrates the importance of dreaming big because you never know what you might achieve.

Related: 12 Millionaire Habits To Start Making Serious Money Soon And Build Wealth In A Hurry

4. Learn from mistakes

Every good businessperson will mess something up. It’s inevitable. What’s important is how you learn from your mistakes over time. Do you adapt after making your mistakes?

Millionaire businesspeople always set some time aside to reflect. Then they create a plan of action for ensuring that it doesn’t happen again. Most failed businesspeople put it down to “bad luck.”

5. Focus on niches

This important! Try to take over a whole industry at once and you’ll inevitably get swallowed up by the competition. Start small and control your own niche before moving into another niche. When you master your small area, you can push on and expand.

Related: 21 Choices Millionaires Make That You Aren’t Making But Should Be

You’ll be amazed at how much easier it is to expand after you master your own niche/audience first.

Do you have what it takes? That’s the question I always ask novice businesspeople. You need a plan and you need the right habits if you’re going to succeed.

This article was originally posted here on

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