Nothing hits harder in your golden years than the realisation that your retirement nest egg is set to run dry long before you do. It’s a scenario facing far too many South Africans: after decades of work and diligent saving, they make the crushing discovery that their income will last only a handful of years.
After that, they’re likely to rely on their families, or the state. But it doesn’t have to end this way.
With a clearer grasp of the forces at play – and control over the factors that influence your income – you can give yourself the best chance of making your savings last a lifetime.
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The golden equation
At the heart of retirement planning lies one equation: investment returns must be greater than inflation, fees and drawdowns. If your net return keeps pace with those pressures, your capital can last. If it doesn’t, you will eat into the pot that you’re depending on.
You cannot control the markets or inflation, but you can control how your money is invested, what you pay in fees and how much you withdraw. Those three decisions make all the difference between lasting security and running out of funds too soon.
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Investment returns are your growth engine
One common mistake is playing it too safe too soon, by locking into cash and bonds that can’t keep up with inflation, believing they are playing it safe. In reality, this often means that the returns barely match inflation, steadily eroding purchasing power.
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Reaching retirement doesn’t mean that you can stop investing. The real danger isn’t a bad run in the markets, it’s running out of money while you’re still alive. For many of us, retirement now lasts 20 or even 30 years.
A 65-year-old today could easily live into their 80s or 90s, so their savings need to keep working as long as they do. That’s why staying invested in growth assets matters. Growth investments have beaten inflation over time, even if the ride can be bumpy from year to year.
- Feel like your investments could be doing more for you? Did you know you can get a free comparison report from 10X Investments?
The fees you pay can destroy your wealth
Fees are another silent threat. They compound against you year after year. Take a living annuity of R4.8m with a 5% draw. If fees are 3%, that’s R144,000 annually: money that could be compounding in your favour.
Cutting fees to around 1% means more of your money stays invested and working for you, which can add years to the life of your retirement savings. It’s not about what funds promise to deliver; it’s about the money still in your pocket after fees.
- Know your fees! Use the 10X Effective Annual Cost calculator.
Inflation will reduce your purchasing power
Inflation is equally unforgiving. At 6% a year, something that costs R100 today will cost R180 in a decade and R320 in two. Portfolios that preserve capital in nominal terms still leave you poorer in real terms. That is why a “safe” strategy heavily weighted to cash or bonds often backfires over time. Real wealth preservation requires real growth.
Drawdown discipline and product choices
The amount you withdraw each year is one of the biggest factors you control. Research going back to the 1990s – including the well-known “4% rule” from US financial planner William Bengen and the later Trinity Study – shows that withdrawal rates are one of the strongest predictors of whether your money will last.
Drawing around 4% annually supports retirement periods of 30 years or more. While South African conditions differ, the principle holds: drawing too much, too soon puts your retirement at risk.
But remember, fees count too: if you draw 5% and pay 2.5% in fees, your portfolio must deliver 7.5% before inflation just to stay level. Lower fees and a moderate draw create a far more achievable target.
Your product structure also shapes outcomes. A life annuity swaps capital for guaranteed income, which is a useful way to cover essentials. A living annuity offers flexibility: you choose the draw, retain market exposure and can leave capital to beneficiaries. Many retirees combine the two, using a life annuity for certainty and a living annuity for flexibility and growth.
- Did you know you can use the 10X Living Annuity Calculator to do your retirement sums?
Preservation is another make-or-break decision, which is why cashing out retirement savings when changing jobs is one of the fastest ways to destroy future security. Even small balances, left untouched, can compound into meaningful sums given enough time.
Building a retirement that lasts
The path to a sustainable retirement is less about complexity than consistency. Start with an honest budget and a clear sense of your time horizon. Keep a diversified portfolio that is designed for decades, not just the next year. Translate every fee into rands, review them annually and pay attention to net returns rather than chasing short-term winners.
The SA Revenue Service offers a few useful incentives to save. With a retirement annuity, the contributions you make (up to certain limits) can be deducted from your taxable income, and the growth is sheltered from tax while it stays inside the fund.
Tax-free savings accounts add another layer, allowing you to build flexible exposure to shares and even offshore investments alongside your retirement money. The golden rule is simple: pay your future self first. Set up contributions to go off automatically, before day-to-day spending eats up the extra cash.
To test your assumptions, 10X provides two tools that make the numbers transparent: a Living Annuity Calculator, which shows how different drawdowns perform against inflation and fees, and an Effective Annual Cost Calculator, which reveals what you’re really paying.
The retirees who stress less about money aren’t always the ones with the biggest savings pots. They’re the ones who started early, held on to what they’d built, kept fees down, drew a sensible income and allowed for inflation.
Focus on what you can control – your investments, your spending and the income you draw – rather than the things you can’t, like market swings, inflation, world politics or your longevity.
By doing that, you can turn the fear of running out into the reassurance that your savings will see you through.
This article was sponsored by 10X Investments.
The content herein is provided as general information and does not constitute financial advice. 10X Investments is an authorised FSP (number 28250). The 10X Living Annuity is underwritten by Guardrisk Life Ltd.
