Ought to I money in my RAs and spend money on residing annuities?

Pricey Reader,

Thanks in your legitimate query. Your query has lots of totally different segments, and I’ll take care of them hereunder. Please don’t see this as recommendation however as normal info. My recommendation to you’ll be to see a Licensed Monetary Planning skilled to analyse your scenario and current you with a tailormade resolution to your particular scenario. The choices you make now will have an effect on the remainder of your life.

Your pension fund

If in case you have been a member of the GEPF for lower than 10 years, you’ll be entitled to solely a gratuity. If in case you have been a member of the GEPF for greater than 10 years it is possible for you to to obtain a gratuity and an annuity earnings from the GEPF.

Earlier than 1 March 1998 authorities workers weren’t taxed on their lump sum. The tax-free lump sum is calculated by way of the ratio of years labored earlier than 1998 relative to the variety of years you might have labored for the federal government. The quantity must be mirrored in your profit assertion, to allow you to make an knowledgeable alternative.

Which means your tax-free lump sum may be far more than the R500 000 allowed by the present tax tables relevant to lump sums from retirement funds.

If the above applies to you, it might be finest to take the total lump sum that you’re entitled to tax-free, and make investments it in a discretionary funding from the place you possibly can draw a tax-friendly earnings.

In some circumstances, it is likely to be prudent to withdraw as much as R1 000 000 of the gratuity because the tax payable on the lump sum shall be lower than the tax in your annuity earnings. The stability of your gratuity, which is able to then be taxable may be transferred to a residing annuity to keep away from paying tax on it.

Your retirement annuities

If a big penalty isn’t payable in your retirement annuities, it might be a good suggestion to withdraw them.

The one-third portion can then be invested elsewhere, and it may be left to develop with out attracting additional retirement lump-sum tax. You may be launched from the Regulation 28 necessities of the place you possibly can make investments and in case you ought to go away, the trustees will now not have a say on who will get your funds.

On the residing annuity portion, you possibly can select an earnings of between 2.5% and 17.5%. If in case you have sufficient earnings, you possibly can select the bottom share of earnings and make investments the earnings in your discretionary funding.

Must you want extra earnings later, you possibly can improve the proportion.

At the moment, we advise an earnings share of between 4 and 6% each year as being the only option, to allow your annuity earnings to develop sooner or later.

Working after retirement

You additionally plan to proceed working after retirement and also you requested in case you ought to spend money on a brand new retirement annuity once more.

Persevering with with a retirement annuity will certainly prevent tax.

Retirees typically overlook that they’re drawing earnings from varied sources and all sources are taxing you as if you’re solely incomes the earnings from one supply.

You would need to maintain monitor of your gross earnings and ask the assorted sources that you’re drawing earnings from to regulate your tax price. Both this or face an enormous tax invoice.

Put money into a brand new retirement annuity?

When you ought to spend money on a brand new retirement annuity, which I assume could be quick time period, you possibly can spend money on it till the worth is slightly below R247 000.

Below the present Pension Funds Act, you possibly can then withdraw this quantity as a lump sum, if it’s the solely retirement annuity you might have with the supplier.

I hope that this info will assist you to, and I want you all the perfect on this subsequent cycle of your life.

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