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How much do I need to invest to receive a monthly income of R10k over 10 years?

After 10 years, the initial amount should still be available.

I want to find out what lump sum amount I need to invest to receive a monthly income over 10 years of R10 000. The income should start paying out immediately. After 10 years, the initial amount should still be available.

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Dear reader,

Drawing an income from an investment, and preserving the capital, is mainly based on the investment approach you choose.

When it comes to any income-generating investment, a well-diversified approach is advised. The short-term approach is ensuring a low volatility environment when it comes to the actual income earned (cash and bonds).

Together with that, the more important part of the strategy is ensuring you have exposure to growth assets, in the form of equities, the asset class most likely to outperform inflation – and, more importantly, your income drawings – over the longer term. Although not guaranteed, this approach can help to ensure your capital lasts for years.

Referring back to your question – the amount you need to invest will depend on what the source of funds is (as the tax implication will differ depending on the source). If the funds are coming from a retirement fund for example (pension, provident fund or retirement annuity), income tax will apply, and you will essentially need a higher investment value to invest to ensure the R10 000 per month net income.

If you are referring to a voluntary investment vehicle (already post-tax funds), our advice would be to withdraw an income of 5% of fund value. With the appropriate investment strategy, you will be earning a long-term income and not depleting the capital amount.

You will need roughly R2.4 million to invest, assuming a 5% withdrawal (R10 000 per month).

This is for the initial withdrawal requirement of R10 000 per month.

If invested according to the strategy advised, capital growth can be expected and essentially your 5% income drawing will become more than R10 000 per month as the capital component will increase over time.

The 5% withdrawal will form part of a portfolio where we are expecting long-term returns of the consumer price index (CPI) plus 6% or CPI+7% – and therefore your withdrawal is unlikely to deplete the capital as the portfolio is still outperforming the withdrawal rate over a long-term period.

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COMMENTS   22

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p.s. For 10k don’t get married and don’t have a SO and don’t have children.

10k in 10 years time will be enough to buy groceries for a week and electricity for a day

“…a portfolio where we are expecting long-term returns of the consumer price index (CPI) plus 6% or CPI+7%…”

And which portfolio would that be, for instance?

They won’t tell you because there is not such thing in SA!

Maybe overseas stocks

And this is the heart of the problem – and not an answer at all. RSA bonds are 8.5%. Outvest offers quite a decent interest rate. There is a bank, too, that has a good offer on the table but, well, its history inveighs against investing there. So, with inflation at a STATS SA 4.5 to 4.9% (which, I think, is about 3 or more percentage points off), the return has to be in the region of 11 to 12%. So, the question is: where does one get 12% on a regular investment, not speculative, stock picking.

The answer goes nowhere to answering the heading – really a nothing article

The answer is 2.4 Mil.

Shocking. R2.4M is a decent amount that many will not be able to save. However, R10k/month will not provide a life of freedom. Could be very depressing to many…

Try and save 2.4 million in the first place. Only a cadre can afford that with dodgy deals and not paying taxes

10K halves in it’s buying power every +-7 years. So 10K in 7 years is worth 5K and 7 more years 2,500 good luck

The ‘rule of 72’ states that 72 divided by the inflation rate will give you how many years it will take to lose half your purchasing power. It is not a pleasant exercise, especially when you use a realistic inflation rate and not the massaged number supplied by the government.

The depressing part is that a middle class couple retiring today need about 20 million stashed away in order to maintain their lifestyle. Who has got that kind of money even today!

Even with R 20 mil. the taxman is going to come along and take your food off your table

Agreed.

People are being conned into pension funds and Annuities. You will pay a wack of tax when you withdraw 4% on your 20 million when retired.

If it was discretionary not so much. You can harvest quite a bit of tax on interest, capital gains and rebate. The rest you withdraw is regarded as savings that you live off.

So much for the tax deduction while saving. Subject to Reg 28 and then you will cry during retirement paying much more than you were let to believe you saved.

If the R20m is split between spouses and pension funds and discretionary savings you can work things so that you pay about 10% in tax.

Before retirement if you put 27.5% into an RA or pension fund your tax reduces to 18%.

Its actually very scary to see these type of questions….

there are many people who are not planning properly or lack any financial knowledge

Probably better converting your cash to bitcoin put it on a Cold Wallet and go live in a cheap country like Georgia and then setup a small shop.

I stayed in Georgia for 7 nights 2 years ago, it cost R10,000 all in plane ticket hotels transport food and entertainment.

If you rent an apartment in Tbilisi it will only cost a few bucks a month, food it fresh and cheap whilst second had cars even cheaper. Plus the wine is good and beer cheap.

..awesome comment. Traveled central & eastern Europe. Most expenditure done through our bc-vault when required
Many places even accepted Monero. Turkey, the best place to buy crypto using cash. Commission higher than standard exchanges but privacy peace of mind

With 4% drawdown one can have a annual increase equal to the inflation rate. 4% is the rule of thumb for a drawdown rate. I don’t know where the 5% BS come from.
R3mil is what is needed.

Buy a R1 mil property now. The repayments will be around R7000 per month. Rent that out and let the tenants pay for most of the bond and pay in an extra R5000 yourself.

In 10 years’ time you will be clearing more than R10000 per month on that property after expenses.

What about
repairs and maintenance.
getting tenants
Fly by night tenants.
insurance on property
Income tax on profit made
vandalism
I tried this and for the first 5 years you loose then you start to make a profit but only a small one.

Lets not be horrible here, people are struggling to make a living in this desert of no jobs and looting in South Africa.

For R10,000 a month you need about R1,000,000 in a fixed deposit or Money Maximizer account (Also when interest rates go up in 2022)

End of comments.

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