Question:
I am a 55-year-old working woman with children that are now all working and looking after themselves. As a result I have some extra cash that I would like to invest on a monthly basis.

I haven't decided exactly when I will retire, but it might be in five year's time. What do you suggest?

Answer:
You really need to go and see a financial advisor. He or she will be able to give you a plan for your future.

It's great that you have some extra cash to invest in your retirement funding, but you must chose a product with great care. You also need to establish how much you will need to live on when you retire.

So, for example, if you retire at 60 — and you are earning R10 000 per month at that time — you would need about R2-million rand invested and have no debt commitments. This would enable you to live in the same style as you are living today and it would last about 20 years.

If you do not have close to that saved up at present perhaps you will need to consider delaying your retirement.

There is an easy calculation you can do to work out a more exact figure. You need to estimate what your final salary at retirement will be — let's say it's R120 000 per year. Multiply that by the years you estimate you will be in retirement — let's say 20. You then subtract 20 percent from this figure and it will give you what you will need to have invested in order to give you an income.

In other words R120 000 X 20 = R2.4-million X 20 percent = R480 000 = R1.92-million.

The reason we deduct 20 percent is because, in general, your living expenses reduce when you retire.

However, if you plan on travelling or living it up a little you should not deduct this and stick to the R2.4-million.