How Long Will Your Money Last In Retirement?

A practical look at retirement income, capital depletion, and the question every South African retiree eventually asks — but few ask early enough.

The real risk in retirement isn’t the market — it’s running out of income

Most South Africans approach retirement focused on one number: their retirement balance. The fund value at age 65. The total in the living annuity statement. The figure on the page.

That number feels final. It feels like an answer. But for the people who actually live through retirement, that number is only the beginning of the question.

Most retirement plans are built to reach retirement — not to generate income from it.

The lump sum on retirement day says nothing about how long that capital will hold up against monthly withdrawals, inflation, tax, and medical costs that increase faster than headline CPI. It says nothing about what happens if the market drops 12% in your second year of retirement — at the exact point you’ve started drawing income. And it says nothing about what your spouse will live on if you die first.

The real retirement question is quieter, and harder: how long will my money actually last?

Why this matters more than most retirees realise

Three forces work against retirement capital quietly and constantly. None of them announce themselves. All of them compound.

Inflation. South African headline CPI sits inside the SARB target band of 3–6%, but the inflation a retiree actually experiences is usually higher. Medical aid contributions have been rising at 8–11% per year. Electricity, rates, and short-term insurance have all run ahead of CPI for over a decade. A retiree planning on 6% inflation may be under-modelling their real cost-of-living increase by 2% or more — and over 25 years, that gap is enormous.

Withdrawals. Every rand drawn for income is a rand that no longer compounds. In the early years this seems harmless. By year 12, capital is being eaten from both sides — by withdrawals on one end and by inflation-adjusted income increases on the other.

Sequence-of-returns risk. This is the one almost nobody plans for. If your portfolio averages 9% per year over retirement, that average is comforting on paper. But if the first three years deliver −8%, −2%, and +1% before the average catches up, the capital depletion curve looks completely different. You drew income from a shrinking base. The recovery, when it came, had less to recover with.

This is why two retirees with identical capital, identical income needs, and identical long-term average returns can run out of money fifteen years apart based purely on when the bad years happened. The starting balance does not protect them. The income strategy does.

Watch The Full Explanation

This video explains the retirement income problem in more detail and shows how the calculator works in real-world South African retirement planning.

YouTube video will be embedded here

Use the calculator below to test your own numbers

The calculator below gives you a simplified estimate of how many years your capital is likely to last based on the income you draw from it. Enter two figures:

• Capital amount — the total retirement capital you have available to produce income.
• Monthly income needed — the after-tax income you require every month, in today’s money.

The model assumes a 9% gross annual return, 30% tax on income, and 6% annual inflation on your withdrawal. These are reasonable starting assumptions for a balanced living-annuity-style portfolio in South Africa, but they are assumptions — not predictions. The output is a guide, not a guarantee.

Disclaimer: This calculator is for educational purposes only. It provides an estimate based on the information entered and does not constitute financial advice. A proper retirement income plan should consider your full financial position, tax, risk profile, liquidity needs, and long-term objectives.

What the result actually means

The number the calculator returns is the year in which, under these assumptions, your capital reaches zero. That number is useful — but only if you read it correctly.

It is not a forecast. It is a stress test of your inputs. If the model says your capital lasts 22 years, that does not guarantee you will still have money at year 21 or that you will run out at exactly year 22. It tells you that your inputs — capital, income, return, tax, inflation — are mathematically consistent for around that horizon.

It does not model sequence risk. The calculator assumes a smooth 9% return every year. Real markets do not behave that way. A bad first three years can shorten capital life by five to ten years even if the long-run average return is unchanged. This is one of the most under-appreciated risks in South African retirement planning.

It does not model retiree-specific inflation. If your real cost increases run at 8% — driven by medical aid, electricity, and rates — rather than the 6% in the calculator, the depletion year arrives meaningfully sooner.

Try this: take your number, then mentally run the same exercise with capital reduced by 15% to simulate higher inflation or a worse first few years. The gap between the two answers is your real planning gap.

What a proper retirement income plan considers

If your number worried you, that is a useful signal — not a verdict. Capital that looks fragile under simple assumptions can often be made more resilient through structure. A planning discussion would typically explore the following.

Sustainable drawdown rates. South African living annuities allow drawdowns of 2.5% to 17.5% per year. The regulatory ceiling is not a recommendation. Most advisor research suggests a starting drawdown of around 4–5% is more sustainable for a 30-year horizon, dropping closer to 3.5% for retirees who want a high probability of inflation-linked income across a long retirement. A 17.5% drawdown can solve a short-term cash-flow problem and create a long-term capital problem at the same time.

Tax sequencing. The order in which you draw from different capital sources matters as much as how much you draw. Income from a living annuity is taxed at marginal rates. Dividend income from a discretionary portfolio is taxed at a flat 20%. For a retiree in a higher tax bracket, drawing in a different sequence — or blending sources — can extend capital life by years without changing investments.

Asset allocation after retirement. Once capital sits inside a living annuity, Regulation 28 limits no longer apply. Many retirees stay over-conservative simply out of habit, which feels safer but accelerates real-terms depletion. The right level of growth assets after retirement is usually higher than retirees instinctively choose.

Liquidity and income smoothing. A retirement income plan that depends on selling growth assets in a down year is fragile. Plans that hold a separate, stable income reserve — sometimes called an income bucket — can ride through bad market years without forcing capital sales at the worst moment.

Spousal and estate planning. Most depletion calculators model one life. Real households have two. The income plan needs to work if one spouse dies at 70 and the other lives to 92 — particularly given the female life expectancy gap in South Africa.

Two-pot system effects. Since 1 September 2024, members can access the savings component of their retirement fund before retirement. Every withdrawal taken before retirement reduces the capital base that compounds into your starting income capital. It is worth checking what these withdrawals will do to your projected retirement balance before the decision is made.

Questions retirees ask us most

How much income can I safely draw from my retirement capital?

There is no single answer, but most South African advisor research points to a starting drawdown of around 4–5% per year for a 30-year retirement horizon, with annual increases for inflation. Retirees who want very high confidence in inflation-linked income for life often start closer to 3.5%. The right number depends on your age, asset mix, other income sources, and how much volatility your plan can absorb.

Will inflation actually reduce my retirement income?

Yes — quietly, but significantly. At 6% inflation, the buying power of R30 000 today falls to roughly R16 700 in 10 years and around R9 300 in 20 years. If your income does not increase at least in line with inflation, your real standard of living drops every year. This is why static income annuities feel comfortable at first and uncomfortable later.

What actually happens if my capital runs out?

Capital depletion in retirement is not theoretical. If a living annuity reaches the regulatory minimum capital level, drawdowns become severely restricted, and the income that funded your lifestyle disappears. Recovery from this point is extremely difficult. The planning value of running depletion projections early is precisely to avoid arriving at this point unprepared.

Is the 4% rule reliable in South Africa?

The 4% rule comes from a 1994 US study based on US asset returns and a 30-year horizon. South African inflation, return assumptions, currency, and tax structures are different. The principle behind the rule — that there is some maximum sustainable starting drawdown — applies everywhere. The exact number does not transfer directly. Treat 4% as a useful conversation starting point, not a South African answer.

How is dividend income taxed compared to living annuity income?

Dividend income from South African companies is generally subject to 20% Dividend Withholding Tax — a flat rate. Living annuity income is taxed at your marginal income tax rate, which can range up to 45%. For a retiree in a higher tax band, dividend-based income can be considerably more tax-efficient on a like-for-like basis. This is a planning consideration, not a recommendation; the right structure depends on your full picture.

How do living annuities differ from life (guaranteed) annuities?

A living annuity gives you control over investments and drawdown rate, with the residual capital passing to your beneficiaries. A life annuity provides a guaranteed income for life from an insurer, but the capital is gone. Many South African retirees benefit from a hybrid — a portion of capital secured for life, the rest invested for growth and flexibility. The right split depends on income needs, longevity views, and estate intentions.

Does the two-pot system change how long my money will last?

Yes, indirectly. Withdrawals from the savings component before retirement reduce the capital that compounds into your final retirement balance. Even modest early withdrawals — taken across multiple years — can shorten the working life of your retirement capital significantly because of the compounding effect lost. It is worth modelling this before each withdrawal decision rather than after.

Key takeaways

• A retirement balance is not an income plan. The number on your statement says nothing about how long that capital can produce sustainable, inflation-linked income.
• The biggest threats to retirement capital are inflation, withdrawals, and sequence-of-returns risk — and they compound, so they need to be planned for in combination.
• Drawdown rate, tax structure, asset allocation, and liquidity matter more in retirement than the underlying investment return alone.
• South African retirees should plan to age 90–95, account for medical inflation above CPI, and stress-test for bad early years rather than relying on smooth averages.
• A simple calculator is the start of the conversation, not the end of it. The real plan considers tax, liquidity, two lives, and the order in which capital is drawn.

Take the next step: a retirement income review

If the calculator above raised more questions than it answered, that is the right reaction. A short, structured retirement income review can model your real situation — your tax, your spouse, your medical inflation, your sequence risk, and your estate intentions — rather than a simplified average.

There is no obligation and no product pitch. The aim is simply to give you a clearer picture of how long your capital is likely to last under your real circumstances, and what could be adjusted to extend it.

Book a Retirement Income Review

General information only — not personal financial advice. Figures used in this article are illustrative and based on stated assumptions. Actual outcomes depend on investment performance, fees, tax, inflation, liquidity, product structure, and personal circumstances. Speak to a licensed financial adviser before making investment decisions. AS Brokers CC, FSP 17273.