Retirement Fund Advice

RandomGeek

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May 14, 2015
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240
#21
but FNB fixed deposit for example gives 7.3% and no fees.

both get taxed at retirement minus the 500k tax free so what am i missing.
you have R23,500 tax exemption per year for interest earned. So if you invest in a fixed deposit you can invest ~R293k@8% before you will pay tax on this. After this you will pay tax on the amount over the R23,500 based on your marginal rate.
 
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Zuner

Expert Member
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Aug 8, 2013
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#22
you have R23,500 tax exemption per year for interest earned. So if you invest in a fixed deposit you can invest ~R293k before you will pay tax on this. After this you will pay tax on the amount over the R23,500 based on your marginal rate.
Agreed sorry, i was calculating with the knowledge that i am currently already over that R23800* exemption.
 

supersunbird

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#23
I wouldn't say my mind is set, but running the numbers i can't see the benefit of a preservation fund, but since its recommended by most there must be a bit of info i'm missing out on.

So if i take the money now minus tax and invest at 7.3% i get 1.41m in 35 years.
If i preserve it all at 6% i get 1.05m never-mind the fees they will charge.


getting that money at retirement both will be taxed minus the 500k (although the fixed deposit will be taxed annually when i submit my sars efiling.
the 500k Also means nothing in this instance cause i will have other policies going over 500k
There must be something i'm missing.

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That tax free withdrawal amount might be R3 million in 20 years time (it's an unknown).

You can preserve it in a preservation fund or RA that's invested totally in a money market fund, you'd probably get more than 7.3%.
 

BTTB

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Feb 6, 2004
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7,711
#24
Its got to a point with investments where its difficult to beat inflation due to costs and the market moving sideways or down across many counters.
I have had a RA for years and the gains are paltry at best. My one friend who has similar investments has also complained about poor returns, in some cases losing money. We have debated this investment thing at length and as both small business owners most of our effort goes back into the business and into our own property with upgrades and restoration and more recently my friend even liquidated his investments and put most of it in to Krugerrands.

For us we want to invest in things we understand and can see, so our own businesses and personal properties are our main focus. I think that many of these investment products can only be analysed with hindsight, too late to change gear after the fact. They all look fantastic up front, but when you look back on them over a decade or so and you compare a simple cost of living comparison, I'm convinced for the most part we are losing money, in real terms that is.

For those people that don't have their own business or property, these investment options are probably your only option, at least its savings.
 

Chuckmyster

Executive Member
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Aug 2, 2016
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5,330
#25
Strange, I withdrew funds, way less than 500k (was just under 300k) and the tax man took his share......well, I got ****ed really bad. I don't know much, but I would get an second opinion on that info.
my boss resigned last month and the first R500k was tax free. Then again we dont have a pension fund, it is a provident fund. I think we pay tax every month from our payslip. Then again i might be wrong, im not geek enough to understand this subject :) i just get money and blow it quickly
 

envo

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Jan 14, 2014
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#26
transferring your pension fund to another fund, or a preservation fund etc, is tax free, you won't be taxed for moving funds.

you will, however, be taxed if you decide to take the lump sum payout.

I haven't read all of the replies, so if this has been said before, I apologize.

Personally, I would look at my debt situation first. Do I have debt? Bond? If so, how much. Will paying those off leave me with cash left over after the tax has been taken out? How much money will I "save" by not having to service anymore debt?

So:

(Pension Fund - Tax) - Debt = +balance
and total serviced debt amount is equal or more than the amount I want to save monthly for retirement

Then take the cash payout. Otherwise you can literally transfer it ANYWHERE (I would recommend Allan Gray) and not feel the tax pinch while keeping your funds away from Zuma.
 

envo

Expert Member
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Jan 14, 2014
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#27
So i confirmed that withdrawing is done tax free up to 500k per lifetime.
/QUOTE]

Then why did they tax me so much when I took my R300k? Weird.... I shouldn't have told them what race I was... maybe that had something to do with it
 

Zuner

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1,801
#28
transferring your pension fund to another fund, or a preservation fund etc, is tax free, you won't be taxed for moving funds.

you will, however, be taxed if you decide to take the lump sum payout.

I haven't read all of the replies, so if this has been said before, I apologize.

Personally, I would look at my debt situation first. Do I have debt? Bond? If so, how much. Will paying those off leave me with cash left over after the tax has been taken out? How much money will I "save" by not having to service anymore debt?

So:

(Pension Fund - Tax) - Debt = +balance
and total serviced debt amount is equal or more than the amount I want to save monthly for retirement

Then take the cash payout. Otherwise you can literally transfer it ANYWHERE (I would recommend Allan Gray) and not feel the tax pinch while keeping your funds away from Zuma.
Hi, i have zero debt, so really i just want to do whats best for retirement, and whats best is obviously what pays more -tax at the end of the day.
 

SauRoNZA

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Messages
31,238
#29
Don't take it out in cash, you will lose most of it in tax.

Transfer it to a sensible fund instead like 10x where it will actually grow.

Liberty is the worst, but it's also been a terrible time in the market lately and now is a bad time to be doing a review and expecting positive figures.
 

SauRoNZA

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#30
I wouldn't say my mind is set, but running the numbers i can't see the benefit of a preservation fund, but since its recommended by most there must be a bit of info i'm missing out on.

So if i take the money now minus tax and invest at 7.3% i get 1.41m in 35 years.
If i preserve it all at 6% i get 1.05m never-mind the fees they will charge.


getting that money at retirement both will be taxed minus the 500k (although the fixed deposit will be taxed annually when i submit my sars efiling.
the 500k Also means nothing in this instance cause i will have other policies going over 500k
There must be something i'm missing.

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Where will you invest it for a guaranteed 7.1%? Why not just invest it in the same place through an RA/Pension Fund AND reap the tax benefit at the same time?
 

SauRoNZA

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Messages
31,238
#31
I believe there was a change in legislation with regards to Provident/Pension Funds. If you were in a very old one then the rules are different and the tax is calculated differently.

Think it changed in 2011 and after that any new fund structure has different tax.
 

Chuckmyster

Executive Member
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Aug 2, 2016
Messages
5,330
#32
I believe there was a change in legislation with regards to Pension Funds. If you were in a very old one then the rules are different and the tax is calculated differently.

Think it changed in 2011 and after that any new fund structure has different tax.
Started my provident fund in 2009 and according to it when i retire at 65 i will get out R800k.
Hardly seems worth it :ROFL::laugh:
 

supersunbird

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46,133
#33
Don't take it out in cash, you will lose most of it in tax.

Transfer it to a sensible fund instead like 10x where it will actually grow.

Liberty is the worst, but it's also been a terrible time in the market lately and now is a bad time to be doing a review and expecting positive figures.
10X for 2018 :crying::

1547548444066.png

First since I started in 2013 that it's negative, and it's not like the managed fund providers did much better.
 

Zuner

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Aug 8, 2013
Messages
1,801
#34
Where will you invest it for a guaranteed 7.1%? Why not just invest it in the same place through an RA/Pension Fund AND reap the tax benefit at the same time?
FNB Fixed Deposit at 5 years is 8.25%, reaping the tax benefit is what i'm trying to figure out what exactly is the tax benefit.

Don't take it out in cash, you will lose most of it in tax.

Transfer it to a sensible fund instead like 10x where it will actually grow.

Liberty is the worst, but it's also been a terrible time in the market lately and now is a bad time to be doing a review and expecting positive figures.
10x has fees and lower interest rate than a simple fixed deposit. That's why i'm confused as to what i'm missing.

10X for 2018 :crying::

View attachment 603856

First since I started in 2013 that it's negative, and it's not like the managed fund providers did much better.
And this is my point, Fixed deposit is guaranteed money.

so once again what am i missing? i surely am missing something it can't be so simple can it?
 

SauRoNZA

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#37
10x has fees and lower interest rate than a simple fixed deposit. That's why i'm confused as to what i'm missing.
They don't have an "interest rate".

They have a historical investment return though which isn't really a projection of future performance but is a guideline of sorts.
 

SauRoNZA

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Jul 6, 2010
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31,238
#39
Started my provident fund in 2009 and according to it when i retire at 65 i will get out R800k.
Hardly seems worth it :ROFL::laugh:
Who is managing it? Are they stealing most of the money in "costs" with almost no return?

The discipline of putting it away even with low returns still beats not putting anything at all away though.
 
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