Start small

Feel free to reach out to PSG Wealth Adviser  Charlene Ferreira directly.

Yet we all aim for financial freedom – to some, a goal that sounds almost impossible to realise. We see nothing but the bigger picture of what we want to achieve and then get stuck at the first step to eventual financial freedom.

An annual or a monthly contribution to a long-term investment can go a long way towards ensuring a more comfortable retirement – even if you only invest R500 a month.

This is how

Individuals are allowed to contribute R36 000 per tax year towards a tax-free investment, with a lifetime limit of R500 000.

Growth in this investment is tax free, which means no tax is payable on interest, dividends, and capital gains. Just make sure you don’t exceed your annual limits – the excess is taxed at 40%.

Start early

To make the most of this benefit, it would be prudent to start as early as possible and invest up to the lifetime limit of R500 000. It will take about 14 years if you make the maximum contribution of R36 000 per annum.

Given the long term of the investment, a smart choice would be to invest 100% of the capital in equities, either locally or offshore, to achieve optimal capital growth.

The longer the investment has to generate capital growth, the bigger the benefit will be eventually, when the proceeds are withdrawn tax free – either as a lump sum or as a supplement to your income in retirement.

Simple and easy

A tax-free investment is an effective and straightforward way to grow your nest egg without incurring income tax, as in the case of an annuity and a pension fund income.

In addition, a tax-free investment is a simple solution to create wealth for minor children, as parents or grandparents may contribute to tax-free investments for their children or grandchildren. These children will probably only use the tax benefit of this investment much later, when they are taxpayers themselves.

Practical example of supplement to retirement

Assumptions:

·       Start contributing at age 21

·       Contribute R3 000 a month until R500 000 maximum is reached (in about 14 years’ time)

·       Average annual return on investment 11%

·       Retirement age 65

·       Potential value of investment at retirement:

o   R3 046 093 in current money terms (adjusted for inflation at 5%)

o   R25 960 093 future value

A tax-free investment is not the only way to achieve your goal of financial freedom but definitely a simple and an effortless way to contribute towards this goal.

Contact us today to begin your tax-free investment and start investing before the end of the tax year.