<strong>By: <i>Shreekanth Sing, Technical Legal Adviser, PSG Wealth</i></strong><h2 class="m_6399259765131713625m_3675782979821697509MsoNoSpacing"><b>Contribute more to your retirement savings, end up with a much better pension, and save on your tax bill<u></u><u></u></b></h2><p class="m_6399259765131713625m_3675782979821697509MsoNoSpacing">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.  <u></u><u></u></p><p class="m_6399259765131713625m_3675782979821697509MsoNoSpacing">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. <u></u><u></u></p><p class="m_6399259765131713625m_3675782979821697509MsoNoSpacing">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.</p><img class="aligncenter size-full wp-image-137874" src="https://www.cover.co.za/wp-content/uploads/2019/02/image004-2.png" alt="" width="594" height="340" /><p class="m_6399259765131713625m_3675782979821697509MsoNoSpacing">Source: PSG Wealth. Assumptions: salary is only source of income; annual salary increase 7%, expected growth in value of savings equals inflation plus 4%, expected annual inflation rate 6%, replacement ratio 75%, months to retirement calculated as 443. <u></u><u></u></p><p class="m_6399259765131713625m_3675782979821697509MsoNoSpacing">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!</p>