Question

I started my first job after graduating last year.  The company offers group risk cover but no retirement fund.  How much should I invest each month and what products should I use?

Answer

If your company offers group risk benefits, you likely have some or all of the following:

• Life cover
• Disability cover
• Income protection

These benefits are important. They protect you if something goes wrong.  But they do not help you retire.

A retirement fund’s job is to replace your income one day when you stop working. If your employer doesn’t provide one, the responsibility shifts entirely to you. 

That’s not a problem — as long as you act early. 

The good news is that starting early gives you an enormous advantage. The even better news is that you don’t need to earn a massive salary to get this right.

A good starting rule for someone in their first job is to aim to invest 15–20% of your gross monthly income.   If that feels like too much right now, start with 10% and increase it every time you receive a salary increase or bonus.

Here’s why this matters:

• Time matters more than returns
• Small amounts invested early beat large amounts invested later
• Consistency beats perfection

Someone who starts investing at 23 will usually outperform someone who starts at 33 — even if the older investor contributes more per month.

If your take-home pay feels tight, remember: your first investment habit matters more than the exact rand amount.

Rather than putting everything into one product, think in terms of three simple investment vehicles.

1. Retirement Annuity (10% of your income)

As you do not have a company retirement fund, you should invest 10% of your income  into a retirement annuity. 

There are a number of benefits that come with this investment:

• You can deduct contributions of up to 27.5% of your taxable income (capped annually)
• You pay less tax today
• Investments grow tax-free inside the RA
• It forces long-term discipline

You can’t access the money easily when it is invested in an RA.  This is a positive feature. Your future self will thank you for money you cannot spend at 25.

2. Tax-Free Investment (R1 000 to R3 000) a month

The next investment product to add is a Tax-Free Investment.

The key features of this product are:

• You can invest up to R36,000 per year
• Lifetime contribution limit of R500,000
• No tax on interest, dividends, or capital gains
• Money is accessible if needed

A Tax-Free Investment is ideal for:

• Medium- to long-term goals
• Supplementing retirement income later
• Giving yourself flexibility without tax leakage

3. Flexible investment (5% of your income)

Once your RA and Tax-Free investments are running, any additional savings can go into a discretionary flexible investment like an ETF, unit trust or investment platform account.

This bucket is for:

• Future home deposits
• Sabbaticals or career breaks
• Opportunities you can’t yet predict

There are no contribution limits, but returns are taxable. That’s fine — you are investing here for flexibility.

Before increasing your investments aggressively, make sure you have1–3 months’ expenses in a low-risk portfolio.  This is your emergency fund and prevents you from raiding long-term investments when life happens — and life always happens.

Emergency savings are not an investment. They are insurance against bad things happening to you.

The real secret to wealth building isn’t intelligence — it’s automation.

• Increase your contributions annually
• Use salary increases, not willpower
• Avoid lifestyle inflation

At the start of your career, your greatest asset is time. That means you can afford volatility.

For most young professionals:

• Growth assets (equities) should dominate
• Short-term market movements are irrelevant
• Simplicity beats cleverness

A broadly diversified balanced or growth-oriented portfolio is usually appropriate. Avoid stock picking, chasing past performance and listening to rumours.  The goal is not excitement — it is having investments that compound quietly in the background. 

Starting early, investing consistently, and keeping things simple will do more for your future than any clever strategy ever could.  The most important step isn’t choosing the perfect product. It’s choosing to start — now.