Retirement annuities are among the best performing and best protected ways you can save for your pension. They offer a wide range of tax-saving benefits that mean you receive some of your premiums back through a tax deduction. Yes, SARS pays some of your retirement plan!
If you are going to pay income tax, THEN READ ON!
You can contribute up to 15% of your declared annual income to your RA.
You can also pay up to R 1,800 as an additional arrears payment.
Have you SAVED your full allowance for the year?
A retirement annuity offers significant tax advantages to investors who are committed to investing their money until they are at least 55 years old.
What do you want to do when you retire? What you do NOW will decide what your retirement will be like!
Only 9 out of every 100 South Africans have enough money for a pension! Why?
They only begin saving for a pension at 50 years old.
They rely only on a company pension fund - no additional savings plans.
When changing jobs they spend their pension withdrawal benefit. This is one of the most dangerous things to do!
Having large outstanding debts, such as a bond, after retirement.
You MUST start planning for your retirement when you receive your first pay cheque. It is an ongoing process, not a once-off event. Make it a habit!
How do you plan for retirement?
Identify what monthly pension you want when you retire.
Work out how much money you will need at your retirement to provide that monthly pension.
Choose the best savings and investment products that will get you the money you want.
Keep checking on your investments to ensure that you will meet your retirement goals.
A retirement annuity is a disciplined savings plan, offering you the following benefits:
Your contributions tax deductible up to certain limits– money you would have paid to SARS can now generate investment returns for you!
Investment growth returns are tax free!
You have a guaranteed pension income in your retirement!
You may take one third as a cash lump-sum when you retire!
You have limited access to your money, so the chances of having money when you retire is good!
Protection from creditors - they cannot access your savings - except in cases of divorce or maintenance orders!
How Retirement Annuities Work
Say your income is R 300,000 per year. You can contribute a maximum TAX-DEDUCTIBLE contribution of 15% of this income or R 45,000 per year or R 3,750 per month.
Your marginal tax rate on this contribution is 30%. That is R 1,125 per month. This amount is that SARS is giving you back (by way of a tax-deduction) for saving into an RA!
Or looking at it another way, for every R1 you invest SARS is contributing 30 cents for you. You are actually contributing only 70 cents for every R 1 going into your investment. Although your premium is R 3,750, the actual cost to you after your tax deduction is R 2,625. The rest is from SARS by way of a tax deduction.
So for just R 2,625 invested by you, YOU IMMEDIATELY GET R 3,750 invested into your RA.
That is an IMMEDIATE RETURN OF NEARLY 43% - BEFORE YOUR INVESTMENT EVEN GROWS!!
That's a return you cannot beat!
Over the longer term, these tax savings will have a considerable boost effect on your investment. Along with the power of compound interest, THERE IS NO OTHER INVESTMENT THAT CAN MATCH THE RETURN OF A RETIREMENT ANNUITY!
But that's not all..
If your RA grows at say 10% per year, ANY OTHER INVESTMENT MUST GROW BY 69% to equal your RA. This is because your actual contribution is less, as a result of the exemption from SARS.
You don't get the exemption with any other investment!
R1,000 grows to R1,100 - or a 10% return. Your actual costs was R 700 to get a return of R1,100. That is a return of 57%!
Assumes only R1,000 invested and the contribution qualifies for a tax deduction. No guarantees implied.
You work for yourself - You are an entrepreneur. You own your own business. You don't depend on others to provide for your retirement. Your future is in your hands.
If you do not plan for your future - WHO WILL?
A salaried employee has his pension provided for - you alone must provide for yours.
A salaried employee is told when to retire - you chose your date.
A company pension increases with salary increases - you must ensure yours does the same
You need a flexible retirement plan that offers the best tax benefit whilst allowing you to vary the contributions during the term.A Retirement Annuity offers you all of this.
Reap the full benefits of a lifetime of working for yourself!
10 WAYS TO SAVE TAX WITH A RETIREMENT ANNUITY
A RA is nothing more than a one-person pension plan. They are the main savings vehicle for self-employed persons to save a pension - in a tax-efficient way. Salaried employees, who belong to pension funds, use them to make up a shortfall in their pension plans.
You can deduct (from any income tax you pay SARS), the greater of:
15% of your taxable income if you have no other pension fund, OR
R3 500 less your pension fund contributions, OR
As you earn more, your marginal tax rate increases and so does your tax saving. As much as 40 cents for every R 1 you save, can be paid for you by SARS!
If you cannot use your full tax deduction in any one year, those allowances can be carried over to the next year (and even till maturity), to increase your tax-free portion or your pension payment.
No income tax or CGT is deducted from your investment return – your investment can grow faster than most other investment vehicles.
Retirement funds are exempt from estate duty – more money goes to your dependants.
If you have an added income tax liability, you can deduct a further R1 800 per year in respect of arrear contributions.
You can transfer your full pension fund to your RA - tax free - if you early retire or change jobs.
An RA can be used to build up a fund for post-retirement medical expenses in a tax-efficient way.
The tax savings, combined with flexibility as to retirement dates and contributions and the choice of investment and guaranteed options, make the RA an ideal investment for retirement planning!
SAVE ON TAX AND RAISE RETIREMENT CAPITAL WITH YOUR OWN BUSINESS! ... by employing your wife and paying her a salary, with which she takes out an RA.
Employ your wife and pay her a salary, which is tax deductible for your business. Your wife then pays the maximum contribution to her RA. After this deduction, ensure that the balance of her salary is below the taxable threshold, thus no tax is paid on her income!
Income paid to your spouse must be reasonable in relation to services rendered.
NOW, That's something to seriously consider!
What if you're forced to retire a few years earlier than you expected? What if you find at age 60 that you haven't enough to retire on? It's then too late. And what if you can't retire because you don't have enough?
Surely, it makes sense to do something NOW? An additional investment today can buy you a whole lot of added peace of mind.
Why not pay yourself your hard earned money instead of paying the Receiver?
Get YOUR gift today - Talk to me NOW.
And if you do not have a RA, even more reason to call me!
As a certified financial planner, I would like to help you make sure that you will enjoy your retirement and make your life as comfortable and carefree as you dream it will be - no matter what the circumstances.
The sooner the better, because when it comes to financial planning only you can make the difference.