By: Nshalati Hlungwane, Institutional Clients manager at Allan Gray

Most investors aim to secure a sustainable income for a comfortable retirement. Yet many South Africans fall short, often due to delaying retirement saving, contributing inconsistently, juggling day-to-day financial demands and being overwhelmed by complex decisions. But what if we reframed retirement planning?

“Thinking of retirement as a journey with specific stages can be a helpful way to overcome many of these obstacles,” says Nshalati Hlungwane, Institutional Clients manager at Allan Gray.

She borrows from retirement industry veteran Don Ezra, who delivered a keynote address at Allan Gray’s annual “Through the noise” retirement benefits conference. Ezra suggested thinking about the retirement journey in three age-related stages. During the first stage, from around age 20 until early 40s, the main aim is to get started. Then, during the second phase, once investors have typically settled into their careers and relationships, it is time to get serious. The final phase is transitioning into retirement – which he argues is the happiest stage of life. The aim of this phase is to enjoy the benefits of retirement planning.

Leg 1: Start the journey

“Time is crucial in retirement investing – the earlier you start, the better the outcome. While it may feel like there’s plenty of time early in your career, starting sooner lets you benefit more from compound interest,” says Hlungwane.

This is demonstrated in Graph 1, which illustrates the cost of delaying.

Investor A, represented by the red line, began saving 15% of their R20 000 monthly salary from their first paycheque at age 23, and increased their contributions annually in line with inflation (assumed to be 5%). Investor B, depicted by the grey line, earned the same salary but only began saving after 10 years of working. Assuming a nominal annualised investment return of 11%, after 42 years, Investor A ended up with 1.9 times (or 89%) more than Investor B at retirement; put differently, Investor B had a pension half the size of Investor A. Most of this difference came from compound growth – earning returns today on returns earned yesterday – illustrating the magic of this phenomenon.

She reminds investors that growth is necessary during this part of the journey. “A higher allocation to volatile assets like equities early on can boost long-term returns, but investors must be prepared for short-term ups and downs. Market fluctuations typically smooth out over time—losses only become real if you disinvest out of fear.”

Leg 2: Accelerate your efforts

She says from the early 40s until about five years before we reach retirement is the time to hit the gas.

“As we mature in our careers, and our salaries rise, we typically enter the peak of our accumulation phase. This presents an opportunity to make up for lost time by rectifying any mistakes we made, or accounting for any disruptions to our contributions in the first phase of our retirement planning.”

To get the most from this phase, she suggests maximising contributions through your employer or in your personal capacity. “It’s also a good time to adopt an “income mindset” by assessing how your savings translate into a sustainable monthly income in retirement. This helps gauge if you're on track – and gives you time to adjust your plan, if needed. A financial adviser or online retirement calculator can assist with these projections."

Leg 3: Take the scenic route

A successful retirement depends on managing both your finances and your time.

“The five years before retirement are key to reassessing your goals, envisioning how you’ll spend your free time, and evaluating your readiness. Some may choose to delay retirement or explore new income streams; others may pursue passion projects or give back. These are personal decisions that require balancing your finances with your vision for a meaningful retirement –taking time to plan makes the transition smoother.”

Leg 5: Ease into the enjoy phase

Counselling psychologist Dr. Hannetjie van Zyl-Edeling emphasises the importance of not only developing a financial portfolio for retirement, but also focusing on psychological, health and social portfolios. In other words, it is crucial to think about your needs holistically as you plan for the years to come.

“Remember that retirement is not the end of your investment journey, but the beginning of the next stage of your life. The risks to manage closely at this time are the risk of capital loss, the risk of an investment not keeping up with inflation, and the risk of outliving your income or accumulated savings,” says Hlungwane.

She says that estimating longevity is complex and best tackled with professional assistance. An independent financial adviser can help with managing risk and implementing an appropriate post-retirement investment drawdown strategy.

“As with any worthwhile journey, starting late – even though it means needing to accelerate harder – is better than not starting at all. Preparing for retirement holistically ensures that it truly will be the enjoy phase of your life,” concludes Hlungwane.