How to cope with volatility – by Andró Griessel
October 20, 2014
Highlights of the 2015 National Budget Speech
March 9, 2015

Don’t miss 28 February – by Samuel Rossouw

Don’t miss 28 February – by Samuel Rossouw

February is a busy month. The World Cup Cricket has started (let’s hope they don’t choke again), the Super Rugby is in full swing (Go Stormers!) and then, on top of it all, you had to remember to be romantic on Valentine’s day too! You would therefore be forgiven for forgetting that your favourite institution, namely SARS, is at its year end on 28 February.  It is therefore also the last day on which any additional contributions to your retirement annuity will be recognized for the current tax year.

The extra tax money that you will receive back in your pocket later this year is often the only motivation for people to make additional contributions to their retirement funds and many clients often forget the ADVANTAGE OF GROWTH that an additional injection in your retirement plan can bring about. And here is the crux, if you do not have a decent retirement plan in place, you will probably never be motivated to contribute extra amounts to your plan. A retirement plan is then also not necessarily a thick pack of documents that you need to decipher, but is preferably a “one pager” which shows all the important information and variables. See examples below from a ProVérte client’s annual feedback.

For example, you HAVE to be able to see how your current provisions compare to your ideal situation (i.e. where you are versus where you want to be):
PV_G1

 

What your capital fund will look like after retirement if you live according to your required income:
PV_G2-624x359

 

What your additional savings should be if you want to get rid of a shortfall;
PV_G3-624x62

 

The impact that your retirement age has on your planning. By the way, it has a huge effect.
PV_G4-624x397

 

And what the impact of different rates of return has on your retirement plan. This impact is larger the younger you are.
PV_G5-624x364

 

If you contribute additionally to your retirement plan, the effect it would have in the long run would be clearly visible. The positive impact may surprise you and may also ease you into the decision to make additional contributions to your retirement annuity.

From 1 March 2015, there is also ‘n second carrot that SARS will dangle in front of our noses in an attempt to improve the savings culture of South African households.  This carrot comes in the form of a tax free savings product.  In other words, an investment vehicle where all interest, dividends and capital gains would be exempt from any income tax. Naturally, a few terms and conditions would apply.  The current main characteristics are the following though:

  • Maximum contributions of R 30 000 per year or R 500 000 in your lifetime.
  • All interest, dividends and capital gains that you would earn on this investment would be tax free.
  • Available via the normal investment vehicles such as fund managers, insurers, banks, etc.
  • No limit on withdrawals

There is also the possibility that other tax advantages (such as the annual interest exemption) may be incorporated with the above-mentioned product, but the final structure is still unclear.  What we can confirm with certainty is that the above investment vehicle is one that we should take notice of and it could become an integral part of your planning. As with all products, the tax saving should not be the only consideration.  Your financial planner should be able to determine fairly easily where this product can make itself at home in your financial plan so that you can extract the maximum value from it.

We often hear how few people are able to retire comfortably.  We are, however, of the opinion that anyone who receives this writing, has the ability, with some discipline and proper advice and monitoring, to secure for themselves a fairly comfortable retirement.  Feel free to speak to your advisor (preferably a CFP®) about compiling a workable plan if it is unclear to you where your planning is headed.

“If you fail to plan, you are planning to fail!” ― Benjamin Franklin

Please contact the author (Samuel Rossouw) if you have any questions or comments on this month’s 2Cents.

Disclaimer: Although all possible care was taken in the drafting of this document, the factual correctness of the information contained herein cannot be guaranteed. This document does not constitute advice and anyone planning on taking any financial action based on this document, is strongly advised to first consult with their personal financial advisor. ProVérte Wealth Management is an authorised financial service provider with FSP no. 5966.

Samuel Rossouw
Show Buttons
Hide Buttons