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WHY NOT SAVE TAX AND BOOST YOUR NEST EGG?

Louis van der Merwe

With 29 February around the corner, time is running out to minimise your tax bill.  Why not save tax and boost your nest egg by adding money to your retirement annuity?

Why should I invest?

  • Your are making provision for your future self to be financially free when you need to replace your salary.

  • You can add up to 27,5% of your taxable income to your retirement annuity and claim the full tax deduction. This means that you can get back up to 45% of your contributions depending on your tax rate. It’s important to not exceed the R350 000 limit as you will not receive a tax deduction on these contributions.

  • Retirement Savings fall outside of your estate when you pass away, keeping the money safe for your financial dependants and also acts as a great estate planning tool.

  • RAs are protected from creditors. A secure way for business owners to protect their wealth.

  • The growth within RAs are tax exempt, making them the most efficient way to invest since no tax is paid on growth or even when you make changes to the portfolio. You will however pay tax on the income that you draw when you retire.

  • Excess contributions that were not tax deductible in previous tax years can be rolled over to the next tax year or even provide tax free income in the future.

Who should invest?

Individuals who:

  • Have not reached their maximum 27,5% contribution limit towards retirement funds in total and who are still below R 350 000 contributions for the current tax year.

  • Have earned high levels of interest. The contribution towards RA’s will offset the taxes payable on interest earned.

  • Have disposed of assets that have triggered capital gains. RA contributions will offset CGT.

Can I use my old Retirement Annuity?

Modern RAs (Retirement Annuities) are much more dynamic and flexible than old generation RAs issued by life assurance companies. The old ones can even be converted to new generation RAs, often with small or no penalties.

To schedule a complimentary consultation give us a call on 021 300 8056 or send an email to info@wealthup.co.za