You’ve done everything right. Started saving early, contributed faithfully every month even when times were tough, and resisted the temptation to dip into your retirement fund.
You’ve watched news reports about inflation eating away at your money’s value and accepted that as part of the deal. Some things you simply can’t control.
There’s another factor that may significantly affect your retirement outcomes: investment fees. Something that could significantly reduce your retirement wealth, yet barely gets mentioned in financial headlines.
It’s not another market crash or new tax. It’s compounding against you every single year: the fees you pay on your retirement investments.
According to the 10X Retirement Reality Report, 50% of South African retirement savers either don’t know what they pay in fees or genuinely believe they pay nothing at all. So what exactly does this mean for your future?
The retirement reality nobody explains
Imagine you’ve just retired with R4.8m in your retirement fund. You’ve done the calculations and settled on drawing 5% annually to live on, giving you R240,000 a year, or R20,000 every month before tax. It’s not extravagant, but it should maintain a decent lifestyle (bear in mind that individual circumstances will influence drawdown rates).
Here is an illustrative example: If your investments carry fees of around 2% annually, you’re paying R96,000 from your capital every single year. That’s R8,000 every month in fees and R20,000 in monthly income. You worked for 40 years to build this nest egg — now for every rand you take, 40c goes to fees.
But fees don’t just take a percentage of your returns. They take a percentage of your entire capital every single year, whether markets are up or down. And every rand that goes to fees is a rand that can never generate future returns for you. This matters because the compounding effect of fees can determine whether your money outlasts you or you outlast your money.
- You can get the straight, simple facts about retirement investments from a 10X retirement expert at no cost to you. Just get in touch.
Fee transparency
Fees are spread across multiple providers and extracted in various ways: advice fees, administration fees, investment management fees, VAT. Each sounds modest individually, but together they accumulate.
Terms like “total expense ratio” and “effective annual cost” sound technical but mostly make it harder to understand what you’re actually paying and whether you’re getting value for it. When you’re paying 2% annually, you’re often not getting double the service of someone charging 1%.
The impact of fees on your living annuity
For retirees, living annuity fees can have significant impact. Unlike the accumulation phase where you’re adding money regularly, in retirement you’re only withdrawing. Every rand paid in fees comes directly from your dwindling capital.
Below is an illustrative example of a living annuity fee scenario:
- 0.75% for advice
- 0.25% for administration
- 1.5% for investment management
On a R4.8m living annuity, this equals R120,000 annually, or R10,000 monthly. For many retirees, fees represent their second-largest monthly expense after housing.
We’re not suggesting fees should be zero. Managing retirement savings properly costs money. But fees should be fair, transparent, and proportionate to the value being delivered.
Taking back control
This is perhaps the only major retirement risk that sits entirely within your control. You can’t predict the stock market or stop inflation, but you can absolutely decide what you pay in fees, and that decision will compound in your favour for the rest of your life.
Start by finding out your total effective annual cost across all retirement investments. It should be clearly stated and easy to find. If you’re digging through multiple documents or making calculations yourself, that tells you something about how transparent your current arrangement really is.
Then understand what that number means for your future. Use retirement calculators to model it out over 20 or 30 years. See what the difference between lower and higher fees actually means in rand terms when compound interest has done its work.
Finally, ask whether you’re getting value for what you’re paying. Not all fees represent poor value, but if you’re paying high fees simply because you’ve never questioned it, then it’s time for that conversation.
10X Investments’ retirement experts will review your current fee structure with no obligation, because the company believes South Africans deserve better transparency around retirement investing.
- If you found the above video helpful, you can get more industry-leading insight and actionable, retirement-focused content on the Rands&Sense by 10X Hub.
Make a choice that will change everything
Inflation will take its share of your wealth, affecting everyone equally. Markets will fluctuate. But paying more than necessary in fees is entirely optional.
Every rand you save in fees stays invested for your future, earning returns and extending your financial independence. Over a 40-year investment journey, that difference doesn’t just add up, it multiplies. It can mean the difference between retiring comfortably and retiring adequately, between financial independence and financial stress.
Fees might have the biggest impact to your retirement wealth, but they’re also the easiest to defeat. You just have to decide to do it.
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 Limited.
Examples outlined in this article are illustrative figures based on constant returns and fees; actual outcomes may differ.
