Retirement Planning Archives - Maysure Financial Services

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The Tax Benefits Of Sound Retirement Planning

Retirement planning is an essential part of securing your financial future, but it can also create significant tax savings in South Africa. With a range of retirement funds available, it’s important to understand the advantages of each type of fund, and how to maximise your tax savings through careful planning.

South Africa Has Three Types Of Retirement Funds

When it comes to retirement planning in South Africa, there are three main types of funds to choose from: Retirement Annuities (RAs), Pension Funds, and Provident Funds. Each type of fund offers different tax advantages, and it’s important to understand the annual contribution limits and tax deductions associated with each.

Retirement Annuities

Retirement Annuities (RAs) are a popular choice for retirement planning in South Africa. Contributions to an RA are tax-deductible, up to a maximum of 27.5% of your taxable income or R350,000, whichever is the lesser. This means that if you contribute the maximum amount, you could reduce your taxable income by up to R97,250. RAs also offer the added benefit of being able to access your savings before the age of 55 in certain situations such as permanent disability or terminal illness.

Pension Funds

Pension Funds are another popular option for retirement planning in South Africa. Contributions to a Pension Fund are also tax-deductible, up to a maximum of 15% of your taxable income or R350,000, whichever is the lesser. This means that if you contribute the maximum amount, you could reduce your taxable income by up to R52,500. Pension Funds also offer the added benefit of being able to access your savings at the age of 55, unlike RAs which access is only permitted under specific conditions.

Provident Funds

Provident Funds are a third option for retirement planning in South Africa. Contributions to a Provident Fund are tax-deductible, up to a maximum of 7.5% of your taxable income or R350,000, whichever is the lesser. This means that if you contribute the maximum amount, you could reduce your taxable income by up to R26,250. One of the main advantages of Provident Funds is that you can access your savings at any time, unlike RAs and Pension Funds which have specific conditions and age restrictions.

It’s important to note that the maximum contributions mentioned above are per annum, so it’s essential to plan your contributions carefully to make the most of the tax advantages available to you. Also, it’s crucial to note that these are the limits for the 2021 tax year and they might change in the future.

Maximising Tax Savings Through Retirement Planning

To maximise your tax savings through retirement planning, it’s a good idea to take advantage of the annual contribution limits and tax deductions associated with each type of fund. For example, if you’re able to contribute the maximum amount to both an RA and a Pension Fund, you could reduce your taxable income by up to R149,750. Additionally, you should ensure that you are contributing to the right type of retirement fund that suits your specific financial situation and retirement goals.

Tax Implications Of Withdrawing Your Retirement Savings Early

It’s also worth considering the different tax implications of each type of fund when you start withdrawing your retirement savings. For example, withdrawals from an RA are taxed as income, while withdrawals from a Pension Fund are taxed as a lump sum. So, it’s essential to understand the specific tax implications of each option before making a decision. The preservation of your retirement savings is essential so that you can live a comfortable life later.

If you are younger than 55 and you withdraw from your retirement fund, you will be subject to penalties, taxes, and charges. Furthermore, if you withdraw your savings before you reach retirement age, you will lose out on the tax benefits.

Conclusion

Retirement planning is a crucial aspect of securing your financial future, and it can also offer significant tax savings in South Africa. However, with a range of retirement funds available, it can be overwhelming to understand the tax advantages of each type of fund and how to maximise your tax savings through careful planning. It’s always a good idea to consult your financial advisor, tax professional, or attorney to understand the specific tax implications of each option before making a final decision.

At Maysure Financial Services, we understand that retirement planning can be a daunting task, and that’s why we’re here to guide you in creating the best possible solution for your lifestyle. We work with you to understand your unique financial situation, and retirement goals, and help you navigate the different options available.

We are here to help you make informed decisions, and ensure that you are on track to secure your financial future while maximising your tax savings.

Remember, retirement planning is a long-term process, and it’s essential to start early to give your savings time to grow and to take advantage of the tax benefits available to you. With the help of Maysure Financial Services, you can feel confident that you are on the right path to securing your financial future and enjoying significant tax savings in the process.

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If you need a little guidance, feel free to get in touch with us.

+27 11 839 2302

info@maysure.za.com

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Why Wait? Plan Your Retirement Annuity Now

Retirement planning can feel like a boring topic. But, there are a few things we just have to learn about and enact in our lives for peace of mind.

When we are working, the one thing we don’t think about too often is our retirement days. But, the truth is we need to think about what this will entail for our future and why this is important.

Why should you care if you have a retirement annuity? Let’s share some ideas:

If you don’t have a retirement fund, how will you live comfortably in the future?
What about the fact that you might not have a pension fund as part of your employment package?

Retirement Annuities in South Africa

Retirement planning has never been more essential. The reality is that today can only lead to a better tomorrow when you financially plan for it. By actively saving and investing. Managing your financial portfolio with your broker can only be to your benefit.

Adding another policy to your financial portfolio will not hurt your “future pocket”. But, what does this mean in South Africa?

South African Laws

Laws are complex. Statutes change often and most people can’t keep up with the amendments. However, as much as it can be a challenge, you need to know how your money is affected in this country.

Current Amendment on the Retirement Annuity in South Africa

The latest amendment came into effect 1 June 2021. This legislation governs the retirement fund industry and will focus on helping South Africans to save enough money.

The National Treasury published final notices that give effect to the 2021 Budget announcements to increase the de-minimis amount regarding withdrawals for paid-up annuities.

The new law also states that transfers from your various financial portfolios, such as a pension fund, will be portable and tax-free.

The best news about a retirement annuity? There is no limit to the number of retirement annuities you can have in South Africa. An annuity will give you a lifetime’s worth of peace.

Why Should You Invest in a Retirement Annuity When You Are Younger?

As a young adult, you have fewer responsibilities. Therefore tucking away money for your retirement does not feel like a burden. It also helps to create a sense of financial responsibility too.

Start early, there is no such thing as “you’re too young” when it comes to financial planning and stability, especially for the future.
Plan, plan, and plan some more. Map out your retirement plan and if you’re not sure how to go about this, speak to a financial advisor. At Maysure Financial Services, we are always willing and happy to assist with your personal finances.
Know your goals. Take control of your finances. Formulate a vision to help you to navigate what the returns on your investments will be.

Where Do You Start?

If you have little understanding of retirement annuities, speak to a qualified professional.

Speak to your financial advisor to gain valuable perspectives. Then, you can make an informed financial decision for your future.

Gaining clarity for your future financial endeavours can only be done by you. You have the authority to start this journey and choose when to start the marathon.

What to Consider When You Are Investing

Do not rely on your children. Your children have their own lives and dreams to fulfil.

At times, this cannot be avoided. But, if you have control over your financial circumstances, try and keep it that way.

Try to avoid depending on Social Security Grants in South Africa. It is simply not enough, especially when you compare it against the cost of your current lifestyle.

The older you become, the more you will need health care. Consider that you will want the best care possible, especially as a senior citizen.

Long-Term Benefits

Although you may be able to access your retirement fund earlier, the idea is to build a long-term income. Trying to save can be a difficult task however the security that a retirement annuity brings until your passing can be a relief.

There are various financial products on the market. The retirement annuity is one of the most attractive of those available.

With some of the products, you receive a once-off payment of R500 000. This amount is tax-free. However, depending on the amount you withdraw every year the tax is proportionate to that per year.

Live Your Best Retired Life

Sitting down with experienced financial planners like Maysure Financial Services can significantly enhance your returns.

People don’t plan to fail, they fail to plan. We are asking you to take charge of your finances.
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To find out more about the retirement annuities, contact us here:

+27 11 839 2302
info@maysure.za.com

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Retirement Annuities: Everything You Need to Know

Nothing is guaranteed except death and taxes. Never was this statement more true than in the year 2020. Unpredictability was the theme with financial stability taking the hardest hit. Almost everyone was forced to learn the importance of saving for a rainy day and the value of solid financial planning.

Of course, no decent plan is complete without the big R. Retirement planning is an essential investment that could make or break your financial future. But, when is enough, enough? How much should you be tucking away for future expenses? How can you be sure that your money will last?

One solution is to add a retirement annuity to your investment portfolio. This investment vehicle is designed for individual investors and is separate to a pension fund provided by your employer. In this guide, we cover everything you need to know about retirement annuities and help you decide if it is a good fit.

What Is a Retirement Annuity?

Retirement Annuity on label of clear jar

A retirement annuity is a long-term investment that can guarantee the investor an income until death. You can fund your annuity either with an upfront lump sum or through a series of payments. You would typically make either payment years in advance. An annuity can be an asset for extra income during retirement.

There are two types of retirement annuities: fixed or variable. The crucial difference between the two is the rate of return. Your returns on variable annuities may rise and fall depending on the stock markets. Fixed annuities, on the other hand, offer a predetermined amount on returns as soon as your insurer pays. Read a little more on the difference between the two here.

You can choose when and how you would like to be paid out. You might choose to pay in a lump sum and begin collecting returns immediately. Alternatively, you can make payments over a long period of time, allowing your money to acquire interest and possibly increasing your returns.

Who Should Invest?

Young people sitting in garden smiling together

As an effective money-saving tool, retirement annuities are a good option for anyone. You are never too young or too old to save for the future. That being said, you might be more inclined to look into a retirement annuity if you fall into specific financial categories.

People who are self-employed might benefit from a retirement annuity. Given that you are not receiving a pension fund from an employer, it’s a good way to invest in your future. It also ensures that you have something to fall back on if you stop running your business.

This doesn’t mean that you shouldn’t consider a retirement annuity if you are employed. This investment is a great way to supplement your income and boost your current savings. It also offers the opportunity to expand your investment portfolio.

Retirement Annuity Benefits

Now, for the best part, here are a few reasons you might consider investing in an annuity:

1. Life-Long Income

The obvious and most attractive reason for investing in a retirement annuity is an income that lasts until your death. This provides a sense of security. Most investments don’t offer this unless your personal savings are astronomical in size.

The rate of return will differ from plan to plan. As mentioned above, fixed annuities are more predictable than variable annuities. Remember, not all annuities have unlimited payments, so make sure you ask your insurer.

2. Tax Benefits

In terms of tax benefits, retirement annuities are definitely one of the most attractive products on the market. Firstly, you may deduct a limited amount of your contributions from your tax income at the end of every year.

Second, there is no tax on the interest earned on your savings. In fact, you only pay tax on the fund once you receive your returns. The tax is also considerably lower than the tax on your current income.

Lastly, with some products, up to R500 000 received as a once-off payment is tax free. All returns after that will only be taxed in proportion to what you draw each year.

Computer mouse on retirement annuity documents

3. Disciplined Savings

Let’s be honest, saving can be hard, not to mention long-term saving. The benefit of not being able to access your retirement savings until after a certain age is definitely a plus. Retirement annuities take away all the temptation of drawing from your nest egg.

They can also offer stability. Whether you are a first-time investor or a seasoned professional, an annuity is a guarantee. For the most part, they are immune from the fluctuations of the stock market, which leaves you with a dependable, limited-risk investment.

While they do have their pros and cons, retirement annuities are a great resource for saving. They can be one of many tools that help expand your investment portfolio. They are also a fantastic way to ensure safety and security for your later years.

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+27 11 839 2302

info@maysure.za.com