Retirement Annuity: How can you benefit?

 

For a youngster, retirement annuities seem like an unnecessary expense. It’s something that is extremely far away and is tomorrow’s problem. This leads to their earliest and biggest financial mistake! For the older generation, this is one of the tools that assists them in financial freedom. A retirement annuity is the first key in unlocking financial prosperity. 

 

You can invest up to 27.5% of your taxable income on a tax-deductible basis up to an annual maximum of R350 000. The reason for these limitations is that you can claim tax back on every premium you pay. This makes the RA one of the best tax-saving vehicles for investors. Retirement annuities are exempt from tax on dividends and interest, and no capital gains tax is payable on the growth earned in the investment. You can use these tax rebates to start annual investments or use them how you see fit. 

 

Pension funds are employer-linked funds, while an RA is independent of one’s employer group or employment status. Employees who contribute towards a company pension fund can use an RA to enhance their retirement funding, while those who don’t have access to a pension fund can use an RA as their primary retirement savings vehicle. 

 

If you leave formal employment, you can transfer your pension fund into an RA without any tax penalties, or you can transfer your funds to a preservation fund where you are allowed one withdrawal. However, you will not be able to conduct ad-hoc payments to a preservation fund. Consult with your financial advisor on the best route for you. 

 

 

With the earliest retirement age being 55, investors cannot access their retirement funds prematurely, with the exceptions being in the case of ill-health and emigration. You can choose how to structure your portfolio to meet your specific needs. It must align with your objectives, investment horizon and risk tolerance. Upon your death, your RA will be allocated to your beneficiaries. While the funds in your RA are protected from creditors, this protection does not extend to tax owed to Sars and maintenance claims. 

 

The new generation retirement annuities are flexible, transparent, highly customisable, and cost-effective and remain one of the most beneficial options for long-term retirement investing. 

 

Setting up a retirement annuity is easy, with the minimum monthly premium being in the region of R500 to R1 000. Get into contact with me today to start a retirement annuity for you. 

 

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