For most South Africans money is tight, but it's still advisable to try and put something away for the future.
Keep in mind though, that most investments are taxable.
Certified financial planner Paul Roelofse explains how the Receiver of Revenue gets his hands on your savings.
He says investing in shares means your dividends will get taxed, while your interest will be taxed if you invest in cash or bonds.
In terms of a property investment, buying to let will result in taxation of your rental income.
Taking advantage of tax-free savings options is of obvious benefit.
Roelofse uses investing an amount of R100 as an example:
In a taxable type of environment (it) will yield abut R17,000 over ten years.— Paul Roelofse, Certified financial planner
The same R100 in a tax-free type of vehicle like a tax-free savings account or retirement annuity will give you over R20,000 for the same amount of money.— Paul Roelofse, Certified financial planner
That makes an immense difference over time.— Paul Roelofse, Certified financial planner
Roelofse recommends investing in both tax-free savings accounts and retirement annuities, according to your specific life stage and needs.
The savings account option gives you immediate access to your funds but you are limited to investing R33,000 a year.
Retirement annuities on the other hand, can only be accessed at the age of 55.
The retirement annuity is best for those that have a higher tax rate because the contributions are tax deductible.— Paul Roelofse, Certified financial planner
I think that speaks to people that are paying 45c in the rand on tax.
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