Can’t wait to lay your hands on your retirement savings?
Before you rush to dip into your savings, pause and reflect. Is your retirement plan truly on target? Have you sought expert advice for your calculations, or did you go it alone? Are you aware of how much the taxman will claim when you make a withdrawal? We're here to unravel the complexities of the new two-pot retirement system, highlighting the crucial details and showing you how to maximise the benefits of the latest legislation.
Essential things to know about the two-pot retirement system
The vault’s door opens a little
From 1 September 2024 you have access to some of your retirement money. Hopefully, it will help you when you are in dire straits. But retirement money is best kept for retirement.
How your retirement annuity changes
With two-pot, your retirement contribution is split in two. One-third is your “savings” and two-thirds are your “retirement money”. From your savings you can withdraw once a year, at any time from March until February (the tax year). The rest stays intact until you retire.
What happens to your pre-two-pot savings?
How your retirement annuity changes
The money you have saved will stay intact until you retire, too. But on 1 September 2024, an amount is pinched from this “old” money and transferred to your savings. It will be 10% of your investment, but only up to the amount of R30 000. This windfall will happen only once.
"Do I pay tax on what I withdraw?”
Yes. If you normally pay 25% tax on your income, and you withdraw R10 000, you will get only R7 500, minus the withdrawal fee. If you owe the South African Revenue Service money, they will take that, too .How to make the most of two-pot
Get started and gain the knowledge you need! Understand exactly how much you'll be taxed when you withdraw and determine the extra amount you need to invest each month to cover it. Explore our two-pot FAQs to see how the two-pot system impacts you throughout your working years, during withdrawals, and at retirement.
Now that a retirement annuity(RA) is so flexible, it may also offer opportunities for other savings goals.
Revisit your retirement plan. Will you have enough? A financial adviser can look at your income and project how much your savings will be when you retire. Their calculations show how inflation will munch at your savings, so you will know what you will be in for.
An RA is the greatest gift you can give yourself. Because of the big tax breaks (equal to your tax rate), you can see it as “investing at a discount”. And this discount beats any Black Friday offering by far. Best is, your growth is tax-free, too.
Get advice
The two-pot system gives you access to your retirement money, but before you touch your savings, check with a financial adviser about a better plan. Chat with a financial adviser to find out how to make the most of the opportunities that two-pot offers.
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