The greatest financial risk most people will face arrives the day they stop earning an income.

At that point, the key question becomes: have you saved enough for retirement? While your final retirement sum is important, how that capital is managed thereafter ultimately determines the quality, security and sustainability of your life after work.

The drawing rate is the percentage of income withdrawn as a percentage of your retirement capital. (Example: Income of R35 000 per month on an R8 000 000 portfolio equates to a drawing rate of 5.25% per annum).

• While simple, the drawing rate helps us assess the level of retirement income which is sustainable over a lifetime. It would be much easier if we were dealing with a finite term, but the challenge is to let your retirement capital outlive you.
• The drawing rate guides how the portfolio’s asset allocation needs to be constructed to provide the desired income within your selected risk profile.
• Lastly, it allows us to stress test your portfolio against market volatility, inflation and longevity.

We often see clients at retirement who have under-estimated their income needs. Therefore, it is vital that a robust budget is drawn up before retirement so that your financial advisor can plan accordingly. Given that retirement can be an extended period (30 years or more), the initial drawing rate is crucial to ensure sustainability. If your initial drawing rate is too high, the ability to build reserves is diminished and the impact on your capital can be detrimental to your future income. It is here where we see when there are periods of tough market returns, the portfolio may need to draw on reserves previously banked.

At your retirement stage, the key question is what level of income can be drawn sustainably over time. While the answer is always client-specific, a broadly accepted principle is that the income drawdown should remain in line with inflation to preserve purchasing power without materially eroding capital. Based on long-term retirement modelling, a sustainable income drawing rate is typically within the range of 4% to 5% per annum, with the exact rate depending on your time horizon, portfolio construction, and the ability to adjust income as circumstances and market conditions change.

When assessing whether your drawing rate is sustainable, the portfolio structure becomes critical. The underlying fund selection determines the balance between income generation, capital growth, volatility and downside protection. All these factors influence how reliably income can be drawn over time without unduly eroding capital. A portfolio with adequate exposure to growth assets helps offset inflation and ongoing withdrawals, while diversification and lower volatility components help smooth returns and reduce the risk of drawing income during market downturns.

It is therefore equally important to review the level of income being drawn on at least an annual basis, as well as where that income is being sourced from to ensure withdrawals do not inadvertently create portfolio imbalances or increase long-term sustainability risk.

Income sustainability is what creates true retirement freedom.

A successful retirement is not defined by a single number or rule, but by how well a retirement plan is structured, managed, and adapted over time to suit the individual. Retirement planning is not a binary outcome of having “enough” or “not enough” capital; it requires a tailored approach that aligns income needs, portfolio construction, and realistic drawdown levels with a client’s personal circumstances. By focusing on sustainable income, flexibility, and regular review, retirees place themselves in a far stronger position to enjoy long-term financial security, peace of mind and independence throughout retirement.