MyMoney Online

Understanding investments: Tax free savings account versus retirement annuity

A tax free savings account (TFSA) and a retirement annuity (RA) are excellent investments as they offer returns which are not taxed. This vastly improves the performance of the investment over time.

Financial fitness coach, Paul Roelofse help you understand the differences between the two, so that you are able to make a more informed and appropriate investment choice. It boils down to different strokes for different folks.

The common ground

Both vehicles enjoy tax free status on their investment returns. Capital gains tax , withholding tax on dividends and income tax on interest and rental income are all free. So they both offer the same tax advantage on returns.

The limits

The TFSA has a limit of R30 000 a year to a maximum of R500 000, whereas, there is no limit to the RA. However, the tax efficiency of the RA is more beneficial the higher your tax rate. The deduction is limited to 27,5% of taxable earnings.

The advantages

Liquidity is the main advantage of TFSA. You can access the funds at anytime. RA is inalienable – meaning that creditors cannot touch your investment. This may prove to be useful for business owners.

The conclusion

So TFSA is for the lower tax payer who needs access to the investment in the short and medium term. RA suites the higher tax payer for the long term where access to cash along the way is not an issue.

There is a strong case for investing in both.

Listen to the audio below for more information...

Read more from Paul Roelofse at www.investforlife.co.za


This article first appeared on 702 : Understanding investments: Tax free savings account versus retirement annuity


CapeTalk welcomes all comments that are constructive, contribute to discussions in a meaningful manner and take stories forward.

However, we will NOT condone the following:

  • Racism (including offensive comments based on ethnicity and nationality)
  • Sexism
  • Homophobia
  • Religious intolerance
  • Cyber bullying
  • Hate speech
  • Derogatory language
  • Comments inciting violence.

We ask that your comments remain relevant to the articles they appear on and do not include general banter or conversation as this dilutes the effectiveness of the comments section.

We strive to make the CapeTalk community a safe and welcoming space for all.

CapeTalk reserves the right to: 1) remove any comments that do not follow the above guidelines; and, 2) ban users who repeatedly infringe the rules.

Should you find any comments upsetting or offensive you can also flag them and we will assess it against our guidelines.

CapeTalk is constantly reviewing its comments policy in order to create an environment conducive to constructive conversations.

Read More
'The South African stock market is massively hedged against a weak rand'

'The South African stock market is massively hedged against a weak rand'

The Money Show’s Bruce Whitfield interviews Galileo Capital Personal Financial Advisor Warren Ingram.

3 shares that’ll boost your wealth, if you buy now (by Cannon Asset Managers)

3 shares that’ll boost your wealth, if you buy now (by Cannon Asset Managers)

The Money Show’s Bruce Whitfield interviews Cannon Asset Managers Portfolio Manager Samantha Steyn.

6 tips on how to avoid overspending this festive season

6 tips on how to avoid overspending this festive season

The Money Show’s Bruce Whitfield interviews Galileo Capital Personal Financial Advisor Warren Ingram.

Three reasons why you should have a trust

Three reasons why you should have a trust

A trust is a useful entity in some circumstances as the assets it owns do not belong to you, writes Paul Roelofse .

Three reasons why you shouldn’t have a trust

Three reasons why you shouldn’t have a trust

Having a trust seems like the right thing to do but financial planner, Paul Roelofse says it's not that beneficial for you.

3 things that turn investing into speculating

3 things that turn investing into speculating

Paul Roelofse suggests three things to avoid which will keep you on a path of investing rather than one of speculation.

Popular articles
If you're caught driving with your phone, officials are allowed to confiscate it

If you're caught driving with your phone, officials are allowed to confiscate it

If the engine is running and you are sitting behind the wheel you are not allowed to operate your phone says W Cape's JP Smith

[WATCH] Zola Tsotsi drops bombshell about Zuma meeting at State Capture Inquiry

[WATCH] Zola Tsotsi drops bombshell about Zuma meeting at State Capture Inquiry

Former Eskom chair Zola Tsotsi’s jaw-dropping statements include Tony Gupta saying they could hire or fire Eskom board members.

SA fizzy drinks undergo "shrinkflation" to control sugar intake

SA fizzy drinks undergo "shrinkflation" to control sugar intake

Coca-Cola has reduced its 500ml "buddy" to 440ml and the traditional 330ml Coke cans will soon have a volume of just 300ml.

Mugabe threatened to dissolve Parliament hours before his resignation

Mugabe threatened to dissolve Parliament hours before his resignation

Deputy President of MDC says Mugabe's threats could not deter them from their mission to impeach him - they were determined.

What Shoprite, Checkers, Pick n Pay and Makro will offer on Black Friday

What Shoprite, Checkers, Pick n Pay and Makro will offer on Black Friday

Up for a Springboks level scrum? Instructions on how to ensure you get the deals in your inbox the moment they become known...