How this calculator works
This calculator uses the standard future-value formula for a present lump sum combined with regular monthly contributions, compounded at your expected annual return:
Where: PV = current savings | PMT = monthly contribution | r = monthly rate (annual ÷ 12) | n = months until retirement
The real (inflation-adjusted) value is calculated by discounting the projected fund value at your expected inflation rate — this shows what your savings will be worth in today's money.
Understanding the 4% drawdown rule
The 4% drawdown rule is a commonly referenced guideline suggesting you can withdraw 4% of your portfolio per year in retirement without depleting it over a 30-year horizon.
This is a guideline based on historical market data and does not account for individual circumstances such as fund fees, market conditions, inflation, or lifespan. South African inflation, currency volatility, and investment fees may mean a lower drawdown rate is more sustainable in practice.
Retirement Annuities, Pension Funds, Provident Funds and TFSAs
This calculator is designed for Retirement Annuities (RAs), Pension Funds, and Provident Funds — three retirement vehicles regulated under the Pension Funds Act and Income Tax Act.
They are fundamentally different from Tax-Free Savings Accounts (TFSAs), which are a separate investment product:
| Feature | RA / Pension / Provident | Tax-Free Savings Account (TFSA) |
|---|---|---|
| Contributions tax-deductible? | Yes (capped at 27.5% of income / R350,000 per year) | No |
| Growth taxed? | No | No |
| Withdrawals taxed? | Yes (per SARS retirement tables or marginal rate) | No — completely tax-free |
| Annual contribution limit | 27.5% of taxable income or R350,000 (whichever is lower) | R36,000 |
| Lifetime contribution limit | None | R500,000 |
| Access before retirement | Limited (Two-Pot savings component only) | Anytime, any amount |
| Compulsory annuity at retirement | Generally yes (see below) | No |
South African retirement tax rules (2025/2026 tax year)
Section 11F contribution deduction
Contributions to RAs, pension and provident funds are tax-deductible up to 27.5% of the greater of your remuneration or taxable income, capped at R350,000 per tax year.
Contributions above this cap are not tax-deductible in the current year, but unused deductions carry forward and may reduce tax on your eventual retirement lump sum or annuity income.
The Two-Pot Retirement System
Effective 1 September 2024, new retirement fund contributions are split into two components:
- Savings Component (1/3 of new contributions) — accessible once per tax year before retirement. Withdrawals are taxed at your marginal income tax rate (which can range up to 45%). The minimum withdrawal amount is R2,000.
- Retirement Component (2/3 of new contributions) — preserved until retirement age (55+). No early access permitted.
- Vested Component — savings accumulated before 1 September 2024, plus growth on that portion, continues under the previous rules.
Withdrawals from the savings component are treated as additional income in the tax year they are taken, which may push you into a higher tax bracket.
Lump sum at retirement
At retirement (age 55+), the following rules apply:
- Retirement Annuities and Pension Funds: up to one-third may be taken as a lump sum. The remaining two-thirds must be used to purchase an annuity.
- Provident Funds: contributions made before 1 March 2021 (plus growth on those contributions) may be taken in full as a lump sum. Contributions made after that date follow the one-third / two-thirds rule.
SARS retirement lump sum tax table (2025/2026)
The tax-free portion of your retirement lump sum is a cumulative lifetime threshold. It aggregates all previous retirement lump sums, severance benefits, and pre-retirement withdrawals from the Two-Pot savings component.
| Lump sum amount | Tax |
|---|---|
| R0 – R550,000 | 0% (tax-free) |
| R550,001 – R770,000 | 18% on amount above R550,000 |
| R770,001 – R1,155,000 | R39,600 + 27% on amount above R770,000 |
| Above R1,155,000 | R143,550 + 36% on amount above R1,155,000 |
Living annuity vs Guaranteed annuity
The two-thirds compulsory annuity portion at retirement is used to purchase one of the following:
- Living Annuity — you select the underlying investments and a drawdown rate between 2.5% and 17.5% per year. Investment performance and longevity risk sit with you.
- Guaranteed (Life) Annuity — an insurance-based product that pays a fixed income for life. The income is guaranteed but the capital does not pass to heirs.
A combination of both is also possible.
What this calculator does not account for
- Fund management fees (a typical Total Expense Ratio of 1–2% per year reduces final values significantly)
- Variable returns year-on-year
- Tax on lump sums and annuity income
- Changes in legislation
- Personal tax bracket and other deductions
Disclaimer
This calculator is an educational tool. The figures shown are illustrative projections based on the inputs provided. CalcVibe does not provide financial, tax, or investment advice. For decisions relating to your retirement savings, consult an FSCA-registered financial adviser or your fund administrator.
FIRE stands for Financial Independence, Retire Early — a movement built around saving aggressively during your working years and withdrawing conservatively in retirement. The core idea is that if your investment returns consistently outpace your withdrawals, your fund can last indefinitely.
A drawdown rate of 4% per year — commonly called the 4% rule — means withdrawing 4% of your fund's total value annually. At this rate, historical market data suggests a balanced portfolio can sustain withdrawals for 30 years or more. More conservative rates of 3% to 3.5% provide a greater buffer, extending the fund's lifespan and offering more room for unexpected expenses or poor market years.
One of the most significant risks in early retirement is sequence-of-returns risk: a string of poor investment years right after you retire can permanently damage your fund, even if long-term average returns eventually recover. Drawing down less in the early years — especially during market downturns — helps guard against this.
The 4% rule originates from the 1998 Trinity Study, which analysed US stock and bond portfolios across rolling 30-year periods. While it is widely used as a starting point, it was based on US market data and may not perfectly reflect South African market conditions, rand volatility, or local fund fees — all of which can meaningfully affect long-term outcomes.