Retirement Planning

You can manage your retirement plan more effectively by separating your retirement savings from all other savings (ie your child’s education, overseas trip, new car, new house etc)


You can use a retirement savings vehicle, such as your company pension/provident fund or a retirement annuity to ensure that your funding iro retirement is kept separately.


1. Retirement savings vehicle help keep your retirement money safe. You have limited access to these funds, you therefore need to ensure that you also have emergency funds for those unexpected events.


2. Creditors (people you owe money too) can’t claims funds held in any pension fund, provident fund or retirement annuity policy. However, legal changes allow payments to be made from a retirement fund, for example to an ex-spouse in the case of a divorce.


3. Tax benefits: You can invest up to 15% of your income into a retirement vehicle without having to pay capital gains tax or interest income tax on this investment. This tax saving has a significant impact on your final retirement nest egg. When you retire, you will not pay capital gains tax or interest income tax on money transferred to a post- retirement vehicle such as a living annuity. Only the monthly withdrawals are taxable as an income.


4. Since January 2009 there is no estate duty on approved retirement fund benefits, but if the benefits pays out as a lump sum, income tax will be applied.


5 Tips for Retirement Planning:

1. Choose 55 as your retirement age. You can always extend the age and it provides you with more flexibility around structuring your retirement.


2. Invest 15% of your bonus into a retirement vehicle to maximise the tax advantage.


3. You don’t have to convert to an annuity immediately on retirement. You can keep your money invested in a retirement product benefiting from tax-free growth until you need to draw an income.


4. When retiring, first use your savings you invested outside of your retirement vehicle. The income from these investments is generally not taxable if you did not receive a tax benefit when saving in those vehicles.


5. Once you’ve retired, keep savig a portion of your income so that you build a safety net for emergencies.