As we approach the end of the tax year, now is the perfect time to review and optimise your financial strategy. If you haven’t maximised your contributions to a retirement annuity (RA), there’s still time to do so until mid-February 2025 and take full advantage of the associated tax benefits.
Apart from the tax deduction, retirement annuities offer several compelling benefits:
No tax on interest, dividends, or capital gains while funds remain invested.
It is protected against any claims by creditors.
Flexibility to pause and resume contributions as needed.
RA’s are excluded from deemed estate value and can bypass the executor process with a direct beneficiary designation.
The newly implemented two-pot system allows access to the savings component of your retirement annuity before the age of 55. Please note that any withdrawals from this component are subject to income tax. It is strongly advised to only utilise the savings component in case of a serious financial emergency.
If you are already contributing to retirement through employee benefits but have not reached the maximum of 27.5% of your taxable income, investing in a retirement annuity could be a smart move.
Even if your contributions exceed the tax-deductible limit of 27.5% (or R350,000 annually), the excess can be carried forward to future tax years, ensuring continued tax benefits down the line.
In addition to retirement annuities, Tax-Free Savings Accounts (TFSAs) offer a unique opportunity to grow your wealth while enjoying significant tax benefits. Contributions to a TFSA are not tax-deductible, but all growth – weather from interest, dividends or capital gains – is completely tax-free. You can invest up to R36,000 per year, with a lifetime limit of R500,000, making TFSAs an excellent complement to your retirement planning strategy.
Weather you would like to maximise your RA contributions, explore a TFSA, or both, I am here to help.
Please get in touch with your financial advisor to discuss your options and let’s make the most of these opportunities.