MyMoney Online

Tax Free Savings Accounts – a MUST for everyone?

There is value

The recent tax free savings account (TFSA) presents value for everyone by escaping the taxes which are levied on interest, rental income and capital gains tax. Depending on the funds that you invest in, this could reduce the return by a few percentage points. This makes a big difference in the compounding over time. So, there is a distinct value proposition found here.

Fees still apply

Don’t ignore the fees, however, as they still apply. You will pay fees to the administrator, the fund manager and the financial advisor (if you use one).

Depending on the funds chosen for the investment the collective fee could be as high as 2%. So, if the fund performs at 10% the actual return which will be 8%. If tax was applied this would be further reduced. This which is where the real value of the TFSA is found.

The limits

You can invest a maximum of R30 000 per annum (R2500 per month) with a maximum life time contribution of R500 000 which will take around around 17 years to reach. The ceiling will probably be adjusted over time to compensate for inflation as there is no provision for automatic inflation increases if you take up the maximum annual allowance.

The same investment principles apply

The investment is liquid, meaning that you can withdraw at any time. You should be careful, however, if you have a short term view. In which case, more cautious funds should be considered as opposed to funds invested in equities which need time to smooth out the risk of loosing capital.

You can invest online but do your homework and understand the T’s and C’s before signing up. Understand the funds and the relative costs along with the mechanics of investing and withdrawing.

In a highly taxed environment such as ours, any tax break on investments should be taken advantage of to improve your savings over time.

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


This article first appeared on 702 : Tax Free Savings Accounts – a MUST for everyone?


Read More
What you must learn from the Steinhoff and EOH share price collapses

What you must learn from the Steinhoff and EOH share price collapses

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

3 JSE shares you should consider buying right now (by JM Busha Investment Group)

3 JSE shares you should consider buying right now (by JM Busha Investment Group)

The Money Show’s Bruce Whitfield interviews JM Busha Investment Group Managing Director Joseph Busha.

3 wealth creating shares to buy before yearend (by Anchor Capital)

3 wealth creating shares to buy before yearend (by Anchor Capital)

The Money Show’s Bruce Whitfield interviews Anchor Capital Fund Manager Tamzin Nel.

Are you missing out? Bitcoin (‘Zimbabwean dollar in reverse’) revisited…

Are you missing out? Bitcoin (‘Zimbabwean dollar in reverse’) revisited…

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

3 Reasons why you should have an endowment

3 Reasons why you should have an endowment

Weekend Breakfast's Paul Roelofse presents the other side of the coin relating to pros and cons around endowments.

3 Reasons why you should not invest in an endowment

3 Reasons why you should not invest in an endowment

Weekend Breakfast's Financial Fitness Coach Paul Roelofse shares some sage advice relating to endowments...

Popular articles
'Banned ANC delegates have shot themselves in the foot, got what they deserved'

'Banned ANC delegates have shot themselves in the foot, got what they deserved'

Deputy Editor of Financial Mail, Sikonathi Mantshantsha says branches were warned but did not listen, and he has no sympathy.

Adam Habib: Where would the money to fund free education come from?

Adam Habib: Where would the money to fund free education come from?

Vice-Chancellor of Wits University Adam Habib says Zuma's promise requires about R40 billion in order to be fulfilled.

[LISTEN] 'I never wanted to be President, I was not ambitious'

[LISTEN] 'I never wanted to be President, I was not ambitious'

Listen to what President Zuma had to say on Friday at the #ANC54 Gala Dinner ahead of the elective conference.

JUST IN: Some delegates barred from voting #ANC54

JUST IN: Some delegates barred from voting #ANC54

ANC secretary-general Gwede Mantashe announced that some delegates will not be able to vote in this weekend's elective conference.

Van Damme: De Lille has until Monday to respond to maladministration claims

Van Damme: De Lille has until Monday to respond to maladministration claims

The DA has suspended Patricia de Lille from party activities but Eusebius McKaiser says its statement 'is clear as mud'.

LISTEN: Father of drowned toddler speaks of dangers and heartbreak

LISTEN: Father of drowned toddler speaks of dangers and heartbreak

Connor Weber, fell unnoticed into a bin of water and drowned.

Predictably awesome new Nando's ad reminds South Africans ‘we can fix our sh$t’

Predictably awesome new Nando's ad reminds South Africans ‘we can fix our sh$t’

Watch the Guptas pack their bags and run in Nando's inspiring new advertisement.