Retirement planning can feel abstract until you turn a capital amount into a possible monthly income. How much might R2 million, R5 million or R7 million provide? The answer depends on how you use the capital, how long it must last, investment performance, charges, inflation and tax.
Our free Retirement Income: Three Capital Examples worksheet offers a starting point. It shows gross monthly amounts at illustrative annual draws of 3.5%, 5% and 7%, with space to compare an amount against your expenses. These are calculations, not promised returns or recommended withdrawal rates.
| Capital available for income | 3.5% a year | 5% a year | 7% a year |
|---|---|---|---|
| R2 million | R5,833/month | R8,333/month | R11,667/month |
| R5 million | R14,583/month | R20,833/month | R29,167/month |
| R7 million | R20,417/month | R29,167/month | R40,833/month |
Each figure is the capital multiplied by the annual percentage, then divided by 12. It is a gross starting amount, before tax and charges. Drawing more gives you more income initially but can increase the risk of running down your capital. If you take part of your retirement benefit as a cash lump sum, use the remaining capital when estimating income.
Why the age at which you start matters
Imagine contributing R1,000 a month and increasing that monthly contribution by 10% each year. At an assumed 7% effective annual return after fees:
- Starting at 30 and contributing until 65 produces an illustrative balance of about R7.19 million.
- Starting at 40 and contributing until 65 produces an illustrative balance of about R2.23 million.
The difference reflects both extra years for growth and a much larger total amount contributed by the person who started earlier. These are nominal illustrations, not guaranteed outcomes or amounts adjusted for inflation. Our detailed guide shows the calculations and assumptions.
Guaranteed income or flexible income?
A guaranteed life annuity pays income under an insurer’s contract, generally for life. The starting income, future increases and provision for a spouse depend on the quotation and options selected.
A flexible living annuity keeps the capital invested and allows you to choose an income draw within the applicable rules. Its value and income are not guaranteed for life. Investment performance, fees and the amount withdrawn all matter.
Some people consider a combination. The percentages in our free worksheet show how to calculate a starting draw from capital; they are not quotations for a guaranteed annuity and do not show how long a living annuity will last.
Tax relief while you save
Qualifying contributions to pension, provident and retirement annuity funds may reduce taxable income within the applicable combined limits. Accessing money before retirement and taking a lump sum at retirement have different tax consequences. Your fund’s vested, savings and retirement components can also affect what you may access.
The detailed guide explains these fund types, the two-pot components, access rules and tax treatment in more detail.
Take the next step
Download the free Retirement Income: Three Capital Examples worksheet:
https://getfinancialsavvy.co.za/product/retirement-income-three-capital-examples/
Explore the detailed Retirement Planning Guide:
https://getfinancialsavvy.co.za/product/retirement-planning-guide-south-africa/
Get Financial Savvy provides general educational information, not personalised financial, investment, tax or legal advice. The tax information in this post applies to the South African 2026/27 tax year only (1 March 2026 to 28 February 2027). The calculations are illustrative and do not guarantee returns or income. Check current rules, your fund terms and your circumstances with SARS and an appropriately qualified professional.