5 Lessons in saving from the Comrades Marathon
|Chris Veegh, |
Head of Consulting at
Clearly, this challenge is not for ordinary people. And yet, every year thousands of very ordinary people take it on and finish before the 12-hour cut-off. The trick is commitment and perseverance, rather than athletic ability.
Saving for retirement may appear just as daunting to some: circumstance, financial or personal, might make this goal as improbable as finishing the Comrades. But the same principles that get you over the line at the Comrades will get you to a comfortable retirement.
1. Prime goal: beat the cut-off
Other than elite and sub-elite runners, the primary goal for every Comrades runner is to at least finish within the 12-hour cut-off. Many might hope to do better, but getting a medal is the first objective.
As a retirement saver, your first objective is to secure your lifestyle – anything more is a bonus. You don’t expect a gold medal at the Comrades, and you shouldn’t expect an extravagant lifestyle in retirement.
Your savings rate is related to your income, so there is a direct link between your current and future standard of living. As your savings cut-off, target a nest egg of around 10 times your annual income when you reach 65 years old. This should afford you an annuity that replaces around 60% of your final annual income, growing with inflation.
You don’t need to replace all your income as some pre-retirement expenses should fall away, leaving you with lower monthly requirements.
2. Join the club
You need a license to run the Comrades, and this requires you to become a member of a running club. As old fashioned as this might seem, there are some benefits to the club system: organisation, planning, goal-orientated training, advice and motivation – to name a few.
These formal structures help many runners get to the finish line. Now, you don’t have to join a retirement fund to save, but it definitely helps. Not only does it get into the habit of saving, a discipline that many of us struggle with, but it also affords you a tax advantage that can increase the value of your retirement benefit by up to 30%.
You can do it on your own – just like you can finish the Comrades in a rhino suit – but it is much harder work. Possible for some, but improbable for most!
3. Time and Perseverance
The Comrades clock starts ticking with the starter’s gun, not when you cross the start line. For those at the back, this can take ten minutes or more. The time lost at the beginning can cost dearly at the end.
As a retirement saver, the first pay-cheque is your starter’s gun. To have a realistic chance of beating your cut-off, your money must do most of the work. The sooner you start saving, the more likely you will succeed as more of your retirement asset comes from returns that actual contributions. When you save for retirement, time is money, so don’t lose time at the beginning.
One of the more common sights at the Comrades are the sweeper buses picking up runners who exit the race early. Sadly, for those who end up on the bus, the results archive keeps a permanent record of this failure: DNF. Like the runners, you can bail on your retirement savings along the way (for example: when you change jobs), but you will have virtually no chance of making your cut-off, and be left with a DNF at the end of your working life.
Imagine running the Comrades to the 20km mark, then starting from the beginning - not only have you lost the distance already covered, but you’ve lost the time as well. In the context of an adequate 40-year retirement savings plan, your first ten years of saving already get you to halfway. If you then cash in, for whatever reason, you simply cannot make that up. You would have to save 25% of your income (rather than the recommended 15%) to make it home. It’s like running 60% faster for the last 70km of the Comrades.
4. Discipline and Patience
To finish the Comrades you need 2 things: discipline and patience. You need to be disciplined in your training, scheduling your training sessions before anything else, and patience to last the course. The Comrades isn’t a flat jog, but rather something of a suffer-fest.
The route is long, hot and full of hills. Your spirits lag on the flats, your heart rate jumps on the climbs and your legs buckle on the descents. Thankfully, it’s all over in a day. Saving for retirement takes decades, but can be equally draining.
Like the Comrades, you need discipline and patience to make it to the finish. Your savings need to be the first thing off your paycheque every month, giving it preference over anything else. You will also need a great deal of patience.
To have any hope of making your cut-off, you must invest a big part of your portfolio in the stock market – the only reliable way to build long-term wealth. The general direction is onwards and upwards but, like on the Comrades route, you will hit bad patches that test your resolve. It’s when you’re at your lowest that the investment industry’s sweeper buses draw up alongside and offer you an “easier” ride.
Don’t be tempted. Changing your investment strategy after a bad patch means you lock-in your losses and miss out on the subsequent recovery. The result? DNF.
5. Stick to the plan
Nobody runs the Comrades on a whim. To have any hope of getting to the start you need to commit yourself to the race. Once you commit to the race you will commit yourself to training, and all the discipline this entails. Your training plan will guide you through the gradual build-up, motivating you along the way as you complete ever-longer distances.
You have to approach retirement saving with the same mindset. Adjust your lifestyle to the commitment you are making. Draw up a realistic and sensible savings plan that has a high probability of beating the cut-off – the pragmatic approach is to save 15% of your income for 40 years in a low cost, well-diversified high equity portfolio. Stick to the plan and you see yourself progress.
It has become a cliché, that retirement saving is a marathon, not a sprint, but the similarities between a successful Comrades and successful saving cannot be ignored.