Leon Bart Financial Services

Maximising your Retirement Annuity contributions

Benefits of maximising your Retirement Annuity contributions [before tax year-end Feb 2020]

One of the ways in which you can enhance your provisions to your retirement savings is through the use of a Retirement Annuity fund (RA). A Retirement Annuity is essentially an investment product to which you can make lump sum investments and monthly contributions in order to bolster your retirement savings. In addition to the benefit of saving towards your future, it offers a place where you can save in a tax-efficient way.

With the festive season behind us, we turn our attention to planning for the next 12 months and beyond. This is a great time to reassess where you are in your journey to financial well-being. One of the key components to this is when we take our steps into eventual retirement and what will that look like for us.

Would you be able to maintain your current standard of living or will you need to make some adjustments to how you live? It is often that one accepts what life gives us? How about taking control of what you want out of life and create the lifestyle that you want to be accustomed too? This is where a trusted financial planner will be able to assist and guide you in achieving your goals. When I assist clients with their planning I take into account there current retirement provisions in place and what you need to do going forward to reach your Retirement goals.

Retirement Annuity and Tax

Tax legislation allows you to deduct from tax each year, contributions to Retirement funds up to certain limits. The current limit on tax-deductible contributions is 27.5% of your taxable income. This limit takes into account all contributions made across all your employer Retirement funds and Retirement Annuities. In addition to the upfront Annual tax benefits of contributing to these products, all growth and returns generated overtime in the funds are also tax-free.

Something to be aware of is that we will never completely escape paying taxes and when you do eventually Retire from your Retirement Annuity you will be able to take up to a third in cash, subject to tax, (the first R500,000 lifetime allowance is tax-free and the remainder is taxed on a sliding scale) and the remaining investment needs to be used to provide you with a Pension (income for life via a single or Living Annuity product). This pension or income annuity, will attract income tax at the prevailing Income Tax SARS tables per current tax year?

Decisions about your future financial well-being can be overwhelming. That’s why when making decisions that have such an enormous impact on your life, it’s always best to approach a professional financial planner for advice. I am able to review your individual circumstances, current savings, and what your retirement goals are. Critically this should be done as a family, so don’t forget to involve your spouse in this common goal. And together you can co-create the right plan for you to reach those goals.

February 28 is the end of the tax year and so time is limited to take advantage of the tax deduction for the 2019/20 tax year. Don’t wait too long to engage or make a decision regarding bolstering your retirement savings. It’s never too early to start creating the future you want to have.

I look forward to assist you in realising your future Retirement goals and dreams. Until next time?

Leon Bart

Maximising your Retirement Annuity contributions