Jaco Prinsloo, Financial Adviser at Alexforbes

There is an old parable about a businessman who finds a fisherman resting beside his boat after a morning’s work. ‘Why aren’t you still fishing?’ he asks.

The fisherman explains that he has caught enough for the day. The businessman tells him that fishing longer could pay for a bigger boat, which could become a fleet of boats. In time, the fisherman could become wealthy enough to retire. ‘And then?’ asks the fisherman.

‘Then you can relax, spend time with your family and do what you love.’ The fisherman smiles because that is exactly what he is already doing.

The story sits at the heart of retirement planning: how much of today’s life should we postpone in pursuit of a more comfortable future?

Retirement is an exchange of money for time

Retirement is often framed as a financial milestone. Yet the real question is not whether you have accumulated enough money. It is whether you have enough money to buy back your time.

Most retirement conversations begin with money. How much do you have, how much do you want and for how long? These questions matter, but they are only half the calculation. Retirement is also a decision about time. Money can sometimes be earned again. Time cannot be recovered.

South Africans are living longer and this fact increases the importance of retirement decisions. Should you delay your retirement if your assets can sustain your lifestyle? Will delaying retirement provide enough additional value to justify giving up some of your healthiest and most active years and can it buy back time that cannot be replaced?

Many people imagine that their best retirement years will begin after 65 or 70. Yet health may decline, energy levels may fall and travel can become more difficult.

The real return on retirement

The return on retirement does not appear on an investment statement. It appears in ordinary experiences that are difficult to value until they are no longer available. What would you pay to have more time to do the things you waited a lifetime to do?

Retirement does not have to mean doing nothing. For many people, the objective is not inactivity but autonomy. They want greater control over where they spend their time and with whom they spend it; consulting, mentoring or pursuing projects.

However, retirement is not automatically a cure for stress. Work can provide structure, purpose, identity and social connection. A successful retirement therefore requires more than sufficient capital. It also requires a clear idea of what will replace the role that work once played.

The cost of retiring early

The financial cost of retiring early is often larger than expected. Not only do you give up the income you would’ve earned if you worked longer but you also give up growth on your investments over that time.

You also stop making retirement contributions, shorten the period available for compound growth and increase the number of years during which your capital must support you.

South African retirement is rarely simple

Although it is commonly mentioned that you should target to replace 75% of your final income when you retire, spending does not always reduce after retirement. For many South Africans, it simply shifts from commuting and work-related expenses to family support, health care and travel.

Tax also matters. How you structure your money at and after retirement can impact how much money you need for retirement to maximise your retirement income. Make use of your tax-free benefits where you can, like using your lump sum tax free amount at retirement.

A retirement decision should therefore be tested after tax and after allowing for inflation, medical expenses and realistic family commitments. Underestimating your expenses can drastically affect the decision on whether you have enough to retire or not.

Plan for several possible futures

Longevity risk is the possibility that you outlive your capital. Life rarely delivers a smooth investment return, a constant inflation rate or a fixed level of spending. A credible retirement plan should be tested against several outcomes instead of one favourable projection.

Can your capital support your desired lifestyle for 30 to 40 years? What happens if returns are lower than expected, inflation remained high or health care costs increased sharply? An adequate emergency reserve is important to reduce the risk of having to sell long-term investments at the wrong time.

The fisherman understood something the businessman had forgotten. The purpose of building wealth is not simply to accumulate more. It is to create greater freedom, security and meaning.

The best time to retire is not determined by age or the number on the statement. It is the point at which your financial resources can sustain your lifestyle, your plan can withstand difficult conditions and work no longer needs to be compulsory.

The challenge is not deciding how much money is enough but recognising when the pursuit of more begins to cost more than it is worth.

Retirement is not only a financial calculation but a question of how you want to spend the limited time available to you.

ENDS