Retirement annuity question

yogidabear said:
You cant take money from the RA and put in to a TFSA >36k without the penalties? So you turn 55 and transfer 360k to the TFSA?
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No you cant (but you can) do lump sum topup’s if you missed years.

You can, but then you will hit with over contributing penalties.
 
zerocool2009 said:
No you cant (but you can) do lump sum topup’s if you missed years.

You can, but then you will hit with over contributing penalties.
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Which is surely a hard no at 40% of 360-36= 129,6k tax? Just asking for us old bugars that never had TFSA as an option
 
yogidabear said:
Which is surely a hard no at 40% of 360-36= 129,6k tax? Just asking for us old bugars that never had TFSA as an option
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It's two different products.
TFSA you invest AFTER tax money. You are not able to claim tax back.
RA (pension) this portion is tax deductable.
 
DS_ said:
It's two different products.
TFSA you invest AFTER tax money. You are not able to claim tax back.
RA (pension) this portion is tax deductable.
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Yes but I am 54 and my question was can I take >36k to a brand new TFSA from my RA when I turn 55 without penalties, but its a no. Most people here are less than 54 and have had the opportunity to invest in a TFSA. I literally heard of it this year
 
yogidabear said:
Yes but I am 54 and my question was can I take >36k to a brand new TFSA from my RA when I turn 55 without penalties, but its a no. Most people here are less than 54 and have had the opportunity to invest in a TFSA. I literally heard of it this year
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Correct. TFSA 36k limit per year. Otherwise penalty.
At 54 you have a good opportunity to save on taxes investing in RA. You can take out of the tax up to 350k (or 27.5% of total income). Depending on your circumstances next year you can get this money back from RA fund.
 
Thank you @supersunbird and @DS_ for the replies. It is quite transparent and figured it was a hard no for >36k per annum contributions to a TFSA. My wife and I froze our RA contributions many years ago as they were not performing, but now looking back we could have done things different. Some of you may laugh at us, but go back a decade and it was not as easy to get information. Am unhappy we had so little information, but excited so many people, these days are better informed.
 
yogidabear said:
Thank you @supersunbird and @DS_ for the replies. It is quite transparent and figured it was a hard no for >36k per annum contributions to a TFSA. My wife and I froze our RA contributions many years ago as they were not performing, but now looking back we could have done things different. Some of you may laugh at us, but go back a decade and it was not as easy to get information. Am unhappy we had so little information, but excited so many people, these days are better informed.
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Your timing is a bit off, more like 15 to 20 years ago ;), I know because before 2014 (aka decade ago) I was using the internet to teach myself about these things. 2005 to 2015 the weekend Personal Finance section of IOL newspapers was very informative and had good investigative articles. Moneyweb.co.za was also good in the 2010s but they went and monetized themselves with a harsh paywall so of less value now.

Anyway, being 54 does not mean game over, since people are generally working until 65, investigate and action moving that RA you have into a good fund with low/lowish fees (Coronation, 10X, Sygnia, there are others). My Coronation RA (which was lumpsum from previous employers fund has almost doubled in the past 11 years with no extra contributions, so you still have time to grow that RA.
 
Thank you DS_ I have requested access to that group. Thanks supersunbird my wife and I are about to open a few things now with ninetyone
 
supersunbird said:
No one can predict the future to answer that conclusively, but there are benefits and negatives to each, and someone else would say get crypto only, and also depends on your goal.

With a TFSA, one would be limited to R36 000 per year contributions (1 March to 28/29 Feb). Any overcontributions get taxed at 40%, so putting in R37 000 will result in only having R36600 in the TFSA. The benefit of the TFSA is that you can have it all in overseas funds like a S&P 500 ETF. No tax on dividends, interest and capital gains. You can withdraw everything. No protection against being scammed or whatever and withdrawing and losing it all.

With a RA, you can contribute up to 27.5% or R350 000 to it in a year, any overcontributions (wish I had this problem) are carried over to the next year/s. No tax on dividends, interest and capital gains. Limited to Regulation 28, whose main limit is 55% local equity/bonds/cash and 45% foreign equity/bonds/cash. The higher your tax rate is the more you actually benefit from retirement contributions tax benefit wise. You are taxed on income - retirement contributions = taxable income. Can take out only 1/3 cash after age 55 and the rest must by a Life or Living Annuity (you will pay income tax on that monthly income). Protection against being scammed or whatever and withdrawing and losing it all if retired or if in an RA, as you cannot access it all (you can by resigning job and getting pension and provident fund and people have been scammed that way). New laws from 1 Sept 2024 will also not allow all new contributions to be accessed by resigning after that day, only up to a third.
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Also: any overcontributions to your RA, you can deduct when you retire too, so effectively you get tax free income! Then with the 2/3 RA, you buy a living annuity that is not bound by reg28 so you can invest 100% offshore equity.

I would do R36000 to Tax Free first though. Then contribute to RA.
 
Gaz{M} said:
Also: any overcontributions to your RA, you can deduct when you retire too, so effectively you get tax free income! Then with the 2/3 RA, you buy a living annuity that is not bound by reg28 so you can invest 100% offshore equity.

I would do R36000 to Tax Free first though. Then contribute to RA.
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Do the banks automatically input this on your IRP5 like the Ra companies do?
 
So Step 1 TFSA 36k per annum
2 RA 350k per annum

When you turn 55 take money out the RA and open a living annuity. My question is do you still keep putting money in the RA? You can not now contribute to the living annuity and get the tax break? Would just simplify things
 
yogidabear said:
So Step 1 TFSA 36k per annum
2 RA 350k per annum

When you turn 55 take money out the RA and open a living annuity. My question is do you still keep putting money in the RA? You can not now contribute to the living annuity and get the tax break? Would just simplify things
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Or you can just let the RA grow more until you need it? You'd need to open a new RA if you then want to keep putting money away, but then why "retiring" from the RA is the first place?
 
supersunbird said:
Or you can just let the RA grow more until you need it? You'd need to open a new RA if you then want to keep putting money away, but then why "retiring" from the RA is the first place?
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Apologies in my haste to move from the old RA and reading the statement above about the living annuity being more flexible for investment type. Will compare the old RA to the new one and depending how bad it is will move the funds across.
 
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