How our calculations work

Methodology · Last reviewed August 2026

MoneyZap is a financial education tool. Every figure it shows is an estimate based on clearly-defined assumptions and the information you enter. It is not financial advice, and it is not a recommendation to buy, sell, or hold any product. This page sets out exactly how each calculation works, so you can understand the numbers, question them, and discuss them with a registered financial adviser.

Income tax (SARS 2026/2027)

We use the official SARS tax tables for the 2026/2027 year of assessment (1 March 2026 to 28 February 2027).

Rebates: Primary R17,820; Secondary (65+) R9,765; Tertiary (75+) R3,249.

• Effective (average) rate = total tax after rebates ÷ income.
• Marginal rate = the rate on your next rand of income, used for amounts taxed at the margin, such as interest earned on investments.

Life cover: the LIFE method

We estimate the life-cover need as Liabilities + Income replacement + Final expenses + Education, then subtract the cover you already have.

L, for liabilities

The total outstanding balance of your active debts (home loan, vehicle finance, personal loans).

I, for income replacement

• We start with household monthly expenses and subtract debt repayments, since those debts are settled separately under Liabilities, so counting them here too would double up.
• We then apply an 80% survivor ratio (a household typically needs around 80% of its prior expenses after one member passes away).
• That annual need is capitalised to your retirement age: the lump sum that, invested today, would replace it each year until retirement.
• The lump sum is assumed to be invested conservatively (stability matters to a survivor), so we discount at a real, after-tax return: an 8% nominal return, less your marginal tax rate on the interest above the annual exemption (R23,800, or R34,500 from age 65), then adjusted for about 4.5% inflation. Because tax already sits in the return, we do not separately gross the income up, which would tax it twice.

F, for final expenses

Funeral costs (R50,000), plus executor's remuneration (3.5% of estate assets plus VAT at 15%, so 4.025%), plus estate duty, plus capital gains tax on the deemed disposal at death. Each asset's estate treatment (set on the Investments page) decides what applies:

• In my own name: executor's fee, estate duty and capital gains tax. Note a unit trust held in your own name belongs here, not under "owned by a trust".
• Life wrapper (beneficiary nominated): no executor's fee, but still estate duty (the proceeds are "deemed property", Estate Duty Act s3(3)(a)).
• Owned by a trust: none of the three, because the trust owns the asset rather than you. But if you sold the asset to the trust on loan account, the outstanding loan is still a claim your estate holds: capture it against the asset and we add it to the dutiable estate and the executor's-fee base. A trust pegs the value you moved across, it does not remove it.
• Retirement annuities fall outside all three: no executor's fee, no estate duty, and no capital gains tax (retirement-fund interests are excluded from the deemed disposal). Tax-free savings accounts carry no capital gains tax either, but they do form part of your estate.

Estate duty is 20% of the dutiable estate up to R30m and 25% above, after the R3.5m abatement (s4A) and deducting debts. A bequest to a surviving spouse defers it (s4(q)). Tick "Estate passes to my spouse" on the Insurance page to model that. Whatever an asset's estate treatment, it still counts as an available resource in the cover-sufficiency check.

Capital gains tax arises because death is treated as a disposal of your assets at market value (s9HA). We take the gain as current value less what you put in (initial amount plus contributions to date), apply the R3m primary-residence exclusion to your home, subtract the R440,000 exclusion that applies in the year of death, include 40% of what remains in taxable income, and tax it on top of your income for that year. Retirement annuities, tax-free savings accounts, trust-owned assets and life wrappers are all outside this. So is the whole estate when it passes to your spouse, because the assets roll over at your base cost (s9HB).

E, for education

A guide of R500,000 per dependant towards university, roughly a four-year degree with residence at current prices.

School fees are deliberately not in this figure. They are part of your normal monthly spending, so they are already covered by the income replacement above, which runs to your retirement age. Counting them here as well would fund them twice. This lump is for the university years, which sit outside a normal monthly budget.

One limitation worth knowing: this is a flat amount in today's Rand. A child starting university in ten or fifteen years will face considerably more than R500,000, because education costs have been rising faster than general inflation. If your children are young, treat it as a floor.

Is your cover enough? Assets and retirement

The need above is then tested against what your family could actually draw on, so the estimated cover need reflects your real position rather than a gross figure:

• Available assets reduce the need, taxed assets first. Your discretionary investments (unit trusts, ETFs, shares, TFSAs, other property) are consumed against the pre-retirement need in a waterfall: taxed holdings first, TFSAs last, preserving tax-free compounding. Your primary residence is excluded (the family must live somewhere), and retirement annuities are excluded here, because they are matched to the retirement step below.
• Anything left over funds retirement too. Assets that survive the pre-retirement need roll forward to retirement age and keep growing in their own tax bucket: TFSAs tax-free (8% p.a.), taxed holdings after tax at your marginal rate. All debit orders continue after death (they are part of the insured expenses) until retirement age, credited monthly, then stop.
• An optional retirement top-up. Because the income replacement only runs to retirement age, we separately check whether the survivor's retirement is funded, using three buckets that are taxed differently. Your retirement annuities grow tax-free (8% to retirement and in drawdown, contributions continuing), but their income is taxed with the SARS age rebates at the retirement age; TFSA income is untaxed; taxed holdings earn after-tax returns with untaxed capital draws. We add up the after-tax income all three can sustain to age 90. Any remaining shortfall against the survivor's need is covered by a top-up of life cover, which, as discretionary capital, grows after-tax (8%) but pays out tax-free. The top-up, discounted to today, is added to the estimated cover need, and is toggled by the "Accommodate for shortfall in retirement funds" checkbox.

The result is an estimate: either your assets and existing cover look sufficient on these assumptions, or there is an indicative shortfall. It is a starting point for a conversation with an adviser, not a recommendation to buy a particular product.

Disability and income protection

We estimate the monthly benefit need as 100% of your monthly expenses (you are still alive and supporting the household), capped at 75% of your gross income, the maximum insurers will typically cover, since a tax-free benefit above your take-home pay would remove the incentive to return to work. These benefits are tax-free in your hands, so no tax gross-up is applied. The extra costs disability can bring (care, medical co-pays, home or vehicle modifications) are not loaded into this monthly figure; they are conventionally covered by lump-sum disability and dread-disease cover alongside it.

Dread disease (critical illness)

A guide figure of 5× your annual income as a lump sum towards treatment, recovery, and lifestyle adjustment.

Retirement and tax-efficiency limits

• Retirement-annuity deductions: up to 27.5% of income, capped at R430,000 per year.
• Tax-free savings: R46,000 per year (raised from R36,000 in the 2026 Budget, effective 1 March 2026), R500,000 lifetime.

Retirement readiness and the earliest retirement age

On Planning Insights we test whether all your investments except your primary residence could fund retirement, using the same three tax buckets as the life-cover analysis: retirement annuities (tax-free growth, income taxed), TFSAs (tax-free both ways) and taxed holdings (after-tax growth, untaxed capital draws). Balances and debit orders are projected to your retirement age (contributions credited monthly, stopping at retirement), each bucket then sustains a level income, in today's money, to age 90, and the total after-tax income is compared with a need of 80% of your current expenses. Any gap is translated into the extra monthly RA debit order that would close it.

We also pinpoint the earliest age at which the plan looks fundable, checking each candidate age year by year. A retirement annuity can legally only pay out from age 55, so for earlier ages the RA stays invested (still compounding tax-free) while the bridge years are drawn from taxed holdings first, then TFSAs, the same taxed-first, TFSA-preserved order as the life-cover waterfall. RA income is taxed with the SARS age rebates for each year actually lived (primary under 65, secondary from 65, tertiary from 75). The first age at which every year to 90 is covered is reported; if a gap remains at your chosen retirement age, we scan the later ages up to 75.

The two-pot system, and what we assume you do

Since 1 September 2024, one-third of what you contribute to a retirement fund goes to a savings component you can draw on before retirement, and two-thirds to a retirement component you cannot. Whatever you had saved on 31 August 2024 stayed behind in a vested component under the old rules, less a once-off seeding amount of 10% of that balance, capped at R30,000, which moved across to your savings component. Our guide to the two-pot system covers the rules in full.

Our projections assume you preserve the savings component and annuitise at retirement. That is exactly what happens if you never draw from it, and it is what the law requires of the retirement component.

We tested whether modelling the alternative was worth it, and it is not. At retirement you may take part of your pot as cash, and the first R550,000 of that is taxed at 0%. But that band is a fixed rand amount and it is not adjusted for inflation, so over 25 years at 4.5% it is worth about R183,000 in today's money. Set against a pot of several million, taking the cash instead of the income changes the retirement income we project by less than 1%, and for middle earners it is slightly worse, because the annuity income was already below the tax threshold and the cash would sit in a taxed investment.

What does move the number is drawing from your savings component. That money is added to your income for the year and taxed at your marginal rate, with no exemption and no tax-free portion. Then it stops compounding.

A single R30,000 withdrawal at age 40, by someone earning R500,000 and retiring at 65, costs R9,300 in tax straight away and a further R68,361 of today's money in retirement savings that never accumulate. That is roughly R4,080 a year of retirement income, every year from 65 to 90, for one withdrawal. The tax is the part you see. The compounding is about seven times larger.

Two limits also apply, and we flag them where they bite. If your retirement pot comes to R240,000 or less, you may take the whole thing in cash rather than buying an annuity. And a living annuity may only pay out between 2.5% and 17.5% of its value a year, so if the income you need would need a larger slice than that, we say so rather than projecting an income nobody can actually buy.

SARS also allows one savings withdrawal per tax year per contract, with a minimum of R2,000, so a separate retirement annuity and pension fund each carry their own allowance.

Where the return assumptions come from

The growth rates are derived from our own fund data rather than chosen. We take every Regulation 28 fund in our database with a ten-year track record and use the ten-year annualised return. South African fund performance is published net of fees, so the TER is already deducted and we do not subtract it again.

The two sit only 0.44 percentage points apart, which is well inside the noise on a ten-year average, so we use a single 8% throughout rather than implying a precision the data does not support. We round down, on purpose. Our data only contains funds that still exist, so funds that closed or merged, which are mostly the poor performers, have already dropped out of the average. That flatters the numbers, and rounding down offsets a little of it.

Two things this deliberately avoids. Picking the best-performing twenty funds would give about 10.4% over ten years, but nobody could have known in 2016 which twenty those would be, so it is not an assumption anyone can act on. And using the last five years instead of ten would give about 10%, because the recent run has been strong. Ten years spans more of a full cycle. For reference, the twenty largest Reg 28 funds by assets returned 8.12% over ten years, in line with the pool, so simply holding a big fund buys no advantage.

Against inflation of about 4.5%, which is roughly what South African CPI has actually averaged, 8% nominal is a real return of about 3.3% a year. Returns are not guaranteed, and small changes in these assumptions move the figures a lot.

Key assumptions at a glance