How Long Will Your Money Last? The 4% Rule for South Africans

The Two Halves of Every Investment

Most people think about investing in one direction: you put money in, it grows, and one day you'll be rich. But there's a second half nobody talks about enough — the day you stop contributing and start living off the pot. That's where the real fear lives. Will it last? Or will you outlive your money?

This is the question that keeps people up at night, and it's actually answerable with maths. Not perfectly — nobody knows what the JSE does next year — but well enough to plan properly. I built a free Investment & Draw-Down Calculator so you can see both halves on one chart: the years you build up, and the years you draw down.

Let me walk you through how it works so the numbers actually mean something.

Part One: Growing the Pot

The growing part is the fun part, and it's driven by three things:

Your lump sum. Whatever you've already got saved. Even if it's zero, that's fine — you start from where you are.

Your monthly contribution. The steady amount you add every month. This is the boring hero of the whole story. R3,000 a month for 25 years at 10% growth becomes well over R3 million, and most of that is growth, not the money you put in.

Your growth rate. This is where okes get carried away. A diversified equity portfolio in SA has historically done around 9–11% a year nominal (before you subtract inflation). Don't plug in 20% because you saw a hot fund do it once — that's fantasy, and fantasy makes for a nasty surprise.

The magic here is compounding. Your growth earns growth. In the early years it feels painfully slow — you're contributing more than you're earning. But somewhere around year 12 to 15, the curve bends upward hard, and your money starts making more each year than you do. That's the whole game.

Do this first: Max your Tax-Free Savings Account before anything else. R46,000 a year growing tax-free for decades is one of the best deals the SARS gives you. My TFSA calculator shows exactly how much tax you save.

Part Two: The Draw-Down (Where It Gets Real)

Here's the bit people get wrong. Retirement isn't the finish line — your money still needs to work for another 25 or 30 years while you spend it. So you can't just look at the big number and relax.

The question becomes: how much can I take out each year without the pot running dry?

The 4% Rule, Explained Simply

The 4% rule is the most famous rule of thumb in retirement planning. It says:

In your first year of retirement, withdraw 4% of your pot. Every year after that, increase that Rand amount by inflation. Do this, and your money should last around 30 years.

So if you retire with R5 million, year one you take out R200,000 (that's R16,600 a month). The next year you take a bit more to keep up with rising prices, and so on.

Why 4%? Because if your investments keep growing at, say, 7% during retirement, and you only pull out 4% plus inflation, the growth mostly refills what you spend. The pot barely shrinks — and often it grows even while you're living off it.

But — and this matters for South Africans — our inflation runs hotter than the US where this rule was invented. If inflation is 6% and your retirement growth is only 6%, then a 4% withdrawal that grows every year will eat into capital faster than the American version suggests. That's exactly why the calculator lets you change all of these numbers, not just the withdrawal rate.

Test It Yourself

The whole point of the Investment & Draw-Down Calculator is to stop guessing. Play with it:

• Try 4% vs 5% vs 6%. Watch how fast "lasts 40+ years" turns into "lasts 18 years." That extra 2% feels harmless until you see the cliff.
• Drop your retirement growth rate. A portfolio that's 10% before retirement is often 6–7% after, because you shift into safer, slower assets. See what that does.
• Push your contribution up by R1,000. The difference at the end is usually shocking — that's compounding rewarding you for starting today instead of next year.

The chart shows the green climb while you're building, the dashed line where you retire, and the orange curve as you draw down. Sometimes that orange line keeps rising — that's the dream, a pot that outlives you. Sometimes it nosedives to zero before you're 80. Better to find that out now, on a screen, than at 72.

The Honest Caveats

No calculator can promise anything. Markets don't grow in a smooth line — they lurch up and crash down, and the order those happen in matters enormously (a crash in your first year of retirement hurts far more than one in year 20). This tool uses steady average returns, so treat the "years lasted" number as a planning guide, not a prophecy.

Two things that genuinely help in the real world:

1. Stay flexible. In a bad market year, spend a little less. That single habit stretches a pot dramatically.
2. Keep a cash buffer. Two years of expenses in cash means you never have to sell investments at the bottom of a crash.

The Bottom Line

You don't need to be a financial advisor to plan this. You need to know your number, know your withdrawal rate, and be honest about growth. Go plug your real figures into the Investment & Draw-Down Calculator and see your own two halves — the build-up and the draw-down — on one chart.

The money you invest today isn't just a number going up. It's the years of freedom you're buying at the other end. Make sure there are enough of them.