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


Recommended

by NEWSROOM AI
Read More
How to get rich by investing in smoking hot US and Canadian dagga shares

How to get rich by investing in smoking hot US and Canadian dagga shares

Returns of 500% are not unheard of. Is this another crypto-like bubble? Not in the least, says Financial Advisor Warren Ingram.

Millennials – contrary to the stereotype - are very, very good with money

Millennials – contrary to the stereotype - are very, very good with money

Life is really hard for young adults, but they’re more than coping. Old Mutual research suggests older adults can learn from them.

Worried about money? How to have a courageous chat with your spouse about it

Worried about money? How to have a courageous chat with your spouse about it

Life planner Kim Potgieter shares five tips on navigating the complexities around money and relationships.

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
'My hubby is 75 and we still do it' - stories about sex on the other side of 50

'My hubby is 75 and we still do it' - stories about sex on the other side of 50

Is biology putting the brakes on your sexuality? Callers share their experiences of sex and growing older.

'Some weed plants with high levels of chemicals have been linked to psychosis'

'Some weed plants with high levels of chemicals have been linked to psychosis'

Naked Scientist, Chris Smith shares his insights on some of the risks associated with smoking marijuana.

[Watch] Dad breaks down when reunited with car sold to pay wife’s bills

[Watch] Dad breaks down when reunited with car sold to pay wife’s bills

Khabazela shares some of the most popular tweets, posts, and videos on 'What's gone viral'.

DStv Premium on a downward spiral, warns tech guru

DStv Premium on a downward spiral, warns tech guru

DStv has lost about 140 000 Premium subscribers to Netflix over the past two years, tech expert Arthur Goldstuck.

Tell me what you want: Study reveals most common sexual fantasies

Tell me what you want: Study reveals most common sexual fantasies

What are your sexual fantasies? Disclosure can bring sexual freedom, but it can also have downsides. A study lists the top trends.

Dr Eve busts myths about the female orgasm that could change your sex life

Dr Eve busts myths about the female orgasm that could change your sex life

As many as 1 in 3 women have trouble reaching orgasm when having sexual play, clinical sexologist Dr Eve explains.