What is a Retirement Annuity?
A Retirement Annuity or an “RA” is a long-term investment intended to fund and/or supplement your income at retirement.
Who is the Retirement Annuity for?
Investing in a retirement annuity (RA) can be beneficial for those looking to save money towards their post-employment years. This tax-efficient product boasts several features that make it an attractive choice. It is always advisable to start saving from an early age so while you may think you are young and have a lot of time to start investing, exercise financial prowess by starting early and take advantage of the added benefit of compound interest. Now if you are older, don’t despair, better late than never. You can still benefit from the tax efficient structure of an RA to help you accumulate funds for your retirement.
Product specific features:
- RA contributions, whether made monthly or as a lump sum, can provide tax benefits that are subject to specific constraints. The deduction is capped at 27.5% of your taxable income or remuneration with an upper limit of R350,000 annually for all retirement funds combined. Additionally, investing in an RA fund offers another significant advantage by avoiding taxes on any investment held within the account such as dividends tax and capital gains tax while accruing interest remains untaxed too.
- Upon your passing, your retirement annuity will not be included in your estate and is therefore exempt from both estate duty tax and executor fees. The death benefit amount will mirror the current investment account value at the time of distribution.
- An RA is protected from Creditors. An RA cannot be claimed by creditors, making sure the money that was meant for you, goes to you.
- Access to your RA is restricted until you reach the age of 55. The unpredictability of life can bring about unforeseen circumstances, but it’s essential to have sufficient funds when retiring. With an RA account, withdrawals are only permitted once you’ve reached this milestone in order to prevent impulsive decisions and unwanted depletion of retirement savings.
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