Sino Booi, Product Management Lead at Momentum Savings, says cricket has lessons for retirement money.

These days, a younger generation is lured to cricket with the shortened Twenty20 format of the game. Cricket officials wanted something faster and more exciting for fans with less patience. So, after three hours or so, a winning team can walk off the field, having whacked their bats, spun their balls, and letting their players jump and dive across the field.

Fortunately, traditional cricket, played over a couple of days, still has its fans, too. Because that is where we want to fetch our comparison with your retirement game.

Saving for retirement is something most people start doing as soon as they start their careers. They’ve heard how important it is to invest over a long time – because of the power of compound interest.

Your money can grow so much faster when not only what you put in grows, but when you start earning interest on your interest. To illustrate it, imagine time and money as the yeast in a ball of dough, making it bigger and bigger. Somehow, your interest gets a life of its own, and over time, you cannot believe your eyes that R50 000 can indeed balloon to R1,5 million, or thirty times more than you invested, if you stick to it for 30 years (at a growth of 12%).

But as most of us don’t have a ready R50 000, we must go about our savings month by month. We can compare our monthly contributions to a retirement fund or a retirement annuity to the singles that add up on a cricket scoreboard.

If we bat consistently and fluently, our score keeps adding up.

But how do you make the score jump and the crowd sit up? By hitting a six.

It’s the same with retirement money. By adding a lump sum to your regular monthly contribution every so often, you will boost your retirement score tremendously.

Let’s see how a yearly top-up can affect your retirement savings.

Let’s say you are 25 years from retirement. You are earning R30 000 per month and contribute R4 500 of that to a retirement annuity. We are making these assumptions: The money grows at 12% per year before fees, your salary increases by 5% per year, and you will increase your retirement contributions by 5%, too. Now we look over your shoulder over the next 25 years:

• Scenario 1: You stick to your plan and add no further contributions.
• Scenario 2: On top of your monthly investments, you invest a 13th cheque every year.

If we round the retirement value off to the nearest million, this will be the picture:

• Scenario 1: Your retirement annuity will grow to R21 million.
• Scenario 2: Your retirement annuity + 13th cheque will grow to R32 million (or 53% more).

This means if you top up your retirement savings with a 13th cheque every year, your retirement money will be more than 50% fatter. That’s incredible. You will also get an additional tax rebate of nearly R8 000. (And if you reinvest your yearly tax rebate instead of spending it, your retirement money will be an incredible 77% more.)

It makes sense to top up your retirement savings with any windfall you may have. Some do it before the end of the tax year by the end of February every year.

One day, you will let out a loud cheer for every boundary you hit for your retirement savings.