- Shreekanth Sing, Technical Legal Adviser

# Could quitting your cappuccino double your retirement income?

Contribute more to your retirement savings, end up with a much better pension, and save on your tax bill.

Let’s say you’re 28 years old, earning R30 000 a month and you have R70 000 in retirement savings. Now let’s look at the difference between contributing 5% and 10% of your monthly salary to your retirement fund from here on.

Ideally you should retire with a pension equal to 75% of your last salary. Working on your current income of R30 000 that means a pension of R22 500 a month.

If you only save 5% a month, you’ll wind up with a pension of R7 879 a month – far less than you’ll need. But if you save 10% per month, you’ll have a pension of R14 594. While still not ideal, it’s a much better outcome. And because of certain tax incentives, you’ll pay less tax a month.

Granted, you’ll have less take home pay, even with the tax incentives – just over R1 000 less. It sounds like a lot, but just look at the difference it makes in the long term. And R1 000 is easier to find than you might think. Are you spending R25 a day on a cappuccino?

That’s already R750. Think about it!

ENDS