Retire: Two-stage FIRE (part 2)

In Latest, Retire by Kristia van Heerden

Quick reminder: Two-stage FIRE is a strategy designed specifically for South Africans who are working to achieve financial independence / early retirement. What makes this strategy uniquely South African, is that it considers mandated retirement ages by local retirement fund providers. 

In the previous blog, we looked at the concept behind Kris Naidoo’s two-stage FIRE approach, and played with numbers to calculate how much one would need to reach financial independence. 

But we know that no two numbers are alike, and we all need to consider our own personal situations and assumptions to calculate the road ahead. 

Key considerations

Below is a list of considerations Kris created to help us understand what we need to know about our current situation to help determine how much we would need to reach FIRE.

Personal info

  •   Your current age
  •   Retirement age/year mandated by your retirement fund
  •   The year you would like to reach financial independence. Think of this as a three to five-year range within your initial target year. 

Investment assumptions

  • Assume a real return % for your investments 
    • Do your research and decide what is a reasonable and likely percentage return.
    • Remember that since you are dealing with a real return (i.e. return after inflation), we are working today’s rand values for the sake of simplicity. 
  •   Know your expenses and your disposable income that’s available for investing. Kris suggests that a rolling 12-month average is best. If you haven’t yet started tracking expenses, you need to start.
  •   Make assumptions on your post-FIRE lifestyle, which will give you an indication of your future monthly expenses. Start with your current expenses and plan for any lifestyle changes – important considerations include medical aid, changes to accommodation, dependents, etc.

Before we move on to the other considerations, let’s quickly look at real return and its relationship to the drawdown rate.

For a specific real return, there is a corresponding relationship to the number-of-years-to-zero (i.e. the year when all funds are exhausted).

Consider drawing up a table such as the one below for your specific real return.

Drawdown rate Years-to-zero
8.75% 13
7.66% 15
6.80% 19
6.41% 21
6.06% 23
5.81% 25
5.08% 34
4.83% 40
4.54% 53
4.44% 62
4.36% 78
4.27% perpetual

(The table assumes a 4.5% real return) 

 Current financial Info

  •   Take stock of your current investments. Split them up into two “pots”:

1. Discretionary Investments (DI)

2. Retirement Funding (RF)

If one or both of the above is zero, especially if you’re just starting out,  don’t stress – as long as you plan to contribute to these pots going forward.

  •   Include and consider other forms of income, e.g. rental income.
  •   Develop a priority plan for your investments, like the example below:

Priority 1: Max out TFSA each year.

Priority 2: Aim to contribute to RF portfolio to reach the annual maximum of 27.5% of gross income through your workplace pension and private RA.

Priority 3: Monthly discretionary savings go into DI portfolio (e.g. ETFs, etc.)

Since each family’s financial situation is different, there are a number of  variables we can’t nail down. Nobody knows what our real return would be over a long period of time, for example. This is why it matters to run these numbers for your particular circumstances and according to your personal priorities. Hopefully Kris’ model is a helpful starting point. It’s certainly a great example of which factors to consider.


Saving for retirement is the biggest investment most of us will ever make. Sadly, it can also be very complicated. In this monthly blog, we try to answer some of the retirement questions we hear most often, ranging from which products are best suited to different circumstances to efficient tax treatments. Words by Carina Jooste.


Upcoming webinars

Click here to meet the Just One Lap team at one of our live, free events.

Subscribe to Just One Lap