TFSA, or? (Need advice)

[Gazed416]

Hi peeps,

Basically I have a 45-day notice account with Standard Bank. I was wondering if the following would be a good idea:

1. Transfer R33 000, which is the TFSA yearly limit, from my notice account to the TFSA.
2. Save between R4000 - R5000 every month in my notice account to save up another R33 000 to then transfer it to my TFSA (only after 12 months to avoid the 40% SARS penalty)
3. Basically keep the remaining that would be left from (4000*12 = R48 000 - R33 000 = R15 000 ) or (5000*12 = R60 000 - R33 000 = R27 000) in my 45-day notice account, then repeat step two.

My concerns about TFSA:

1. Having access to my money at anytime isn't what I want for the next few years. I want the yearly R33 000 to be there without me being able to touch it without notice.
2. If I lose my job, can I then switch to paying roughly R500 per month to add to the initial R33 000 deposit?

If any if you know a good financial adviser I wouldn't mind paying for their services. I'm only trying to do what I think is best for me, but I always feel like there might be better options for a 24 year old.

My main goal is to:

1. Eventually get approved for a home loan, but I wouldn't be able to afford R17 000 a month, so I need to save a big chunk for a deposit. I want to pay less than R5 000 per month, but seems almost impossible!

 

[mr_norris]

1. Having access to my money at anytime isn't what I want for the next few years. I want the yearly R33 000 to be there without me being able to touch it without notice.
2. If I lose my job, can I then switch to paying roughly R500 per month to add to the initial R33 000 deposit?

1. I have a TFSA with Easy Equities. The money is tied up in ETF's though. So to access it, I'd have to sell and then transfer the money out.
2. Yes. You only need to be concerned about staying within the yearly / lifetime cap. How much you contribute per month doesn't matter.

1. Eventually get approved for a home loan, but I wouldn't be able to afford R17 000 a month, so I need to save a big chunk for a deposit. I want to pay less than R5 000 per month, but seems almost impossible!

While the TFSA is a great savings vehicle, I think of it more as something to supplement your retirement. You lose out compound interest if you withdraw early.

Otherwise, what is the interest rate you get with your notice? I use Tymebank as my emergency cash fund. Some of my savings have hit 9% PA interest. It's a really good option.

 

[hawker]

1)There is a process to withdraw money, but withdrawing money robs you of future growth because the 33k limit is pa and 500k in your lifetime.
2)Yearly limit is 33k, you can't add more than that a year, but you can switch to monthly contributions at a later stage.

 

[jman]

What do you want the money for? Retirement? If you're going to touch it before that, then no, I wouldn't suggest a TFSA. It should be used for a long term investment, in equities (I use easyequities, you should too).

Anyways, be careful of financial advisors, because most of them will charge you a % of what you're investing, in products that they're incentivised for you to be in.

I always direct people who ask for this kind of advice to the following material to educate themselves:
https://www.takealot.com/manage-your-money-like-a-f-cking-grown-up/PLID48608525 - very good book, easy to understand and aimed at people just starting out
https://investorchallenge.co.za/all-articles/ - good blog
http://www.stealthywealth.co.za/p/archive.html - another good blog
https://justonelap.com/ - listen to the 'fat wallet' podcasts

 

[Gazed416]

1. I have a TFSA with Easy Equities. The money is tied up in ETF's though. So to access it, I'd have to sell and then transfer the money out.
2. Yes. You only need to be concerned about staying within the yearly / lifetime cap. How much you contribute per month doesn't matter.

1. The thing with Easy Equities is the FICA documents. It's going to be a long process getting affidavits to confirm something such as Proof of address, unless there's another way.
2. Noted with thanks.

While the TFSA is a great savings vehicle, I think of it more as something to supplement your retirement. You lose out compound interest if you withdraw early.

Hmm, now I don't know.

Otherwise, what is the interest rate you get with your notice? I use Tymebank as my emergency cash fund. Some of my savings have hit 9% PA interest. It's a really good option.

It differs. The higher the amount in the 45-day notice account, the higher the interest rate. I started with Tymebank last month and I have R50 in 10 different goalsaves. My plan is to add either R50 or R100 each money to each goalsave. Secondly, I'm also waiting on Bank Zero to see what their products will offer.

 

[Gazed416]

1)There is a process to withdraw money, but withdrawing money robs you of future growth because the 33k limit is pa and 500k in your lifetime.
2)Yearly limit is 33k, you can't add more than that a year, but you can switch to monthly contributions at a later stage.

Number 1 puts me off. Any other suggestion that could benefit me?

 

[supersunbird]

I wouldn't use a TFSA for a specific goal like home deposit. Just the highest interest paying account I could get,

 

[Gazed416]

What do you want the money for? Retirement? If you're going to touch it before that, then no, I wouldn't suggest a TFSA. It should be used for a long term investment, in equities (I use easyequities, you should too).

For a deposit on a home loan.

Anyways, be careful of financial advisors, because most of them will charge you a % of what you're investing, in products that they're incentivised for you to be in.

Understood.

I always direct people who ask for this kind of advice to the following material to educate themselves:
https://www.takealot.com/manage-your-money-like-a-f-cking-grown-up/PLID48608525 - very good book, easy to understand and aimed at people just starting out
https://investorchallenge.co.za/all-articles/ - good blog
http://www.stealthywealth.co.za/p/archive.html - another good blog
https://justonelap.com/ - listen to the 'fat wallet' podcasts

Thanks

 

[Gazed416]

I wouldn't use a TFSA for a specific goal like home deposit. Just the highest interest paying account I could get,

Thanks, but like which one?

 

[jman]

For a deposit on a home loan.

Ah, must have missed that part. I wouldn't sweat trying to find the highest interest rate in that case - it won't make too much of a difference, try make sure you're over 5% or so and it'll be beating inflation. For anything under R100k - tymebank @ 9-10%. That should be a decent amount for a home loan deposit?

 

[supersunbird]

Thanks, but like which one?

Satrix Money Market unit trust if it was me.

 

[My_King]

(only after 12 months to avoid the 40% SARS penalty)

Such thievery and people advocate for this

 

[supersunbird]

(only after 12 months to avoid the 40% SARS penalty)

Such thievery and people advocate for this

Who advocates for that?

 

[My_King]

Who advocates for that?

Will need to search for the posts I made a year ago. But its not only in SA. The last time I heard about taxing people to death was overseas. Some people believe that the more you earn the more you must be taxed.

 

[supersunbird]

Will need to search for the posts I made a year ago. But its not only in SA. The last time I heard about taxing people to death was overseas. Some people believe that the more you earn the more you must be taxed.

The overcontribution tax of 40%, is just applied to the excess capital deposited, once off. They (Treasury, the creator of this) do not want the rich to abuse the product I guess. Someone did some calcs and for some people it might even be worth it, because the later growth is not taxed, Can't find the source yet, google fu is weak today.

 

[jman]

The overcontribution tax of 40%, is just applied to the excess capital deposited, once off. They (Treasury, the creator of this) do not want the rich to abuse the product I guess. Someone did some calcs and for some people it might even be worth it, because the later growth is not taxed, Can't find the source yet, google fu is weak today.

I wonder if any providers would allow the over-contribution of say the full R500k at once. You'd end up paying about R180k in tax, but would we well worth it over about 30 years

 

[zerocool2009]

Number 1 puts me off. Any other suggestion that could benefit me?

You dont need to cash it out (there are now ways to move if you are not happy with the current TFSA account)

 

[zerocool2009]

I wonder if any providers would allow the over-contribution of say the full R500k at once. You'd end up paying about R180k in tax, but would we well worth it over about 30 years

I strongly doubt it. TFSA accounts in SA isnt something new.

On your yearly tax return you complete a section how much did you contribute for the year (and how much overall so far from day 1 when you started all of your TFSA accounts)

 

[supersunbird]

I wonder if any providers would allow the over-contribution of say the full R500k at once. You'd end up paying about R180k in tax, but would we well worth it over about 30 years

You can always contribute R33 000 to 15 different providers to achieve said goal. It will stay R500 000 (or near enough) in the TFSAs, one will just have to pay SARS R180 00 come efiling time.

 

[patrick]

The overcontribution tax of 40%, is just applied to the excess capital deposited, once off. They (Treasury, the creator of this) do not want the rich to abuse the product I guess. Someone did some calcs and for some people it might even be worth it, because the later growth is not taxed, Can't find the source yet, google fu is weak today.

https://twitter.com/x/status/1067799918671212545