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How to put your tax-free savings account to use for retirement

by , 22 October 2015

There isn't an easy way to prepare for retirement. You'll have to make a lot of choices along the way.

If you're contributing to a pension or a retirement annuity, it's good to add some diversification by looking at other ways of saving for your retirement.

And you could do this by using your tax-free savings account.

Read on to find out more…

Investing for retirement with a tax free savings account

With the introduction of tax free savings accounts this year, if you haven’t started to make use of it, why not put it to use for your retirement?

You can use your tax free savings account to invest in either unit trusts or exchange traded funds (ETFs) on a monthly basis.

With the current annual limit at R30,000, this means you can invest up to R2,500 a month into unit trusts or ETFs. Any returns or dividends you receive from these will be tax-free.

If you contribute the maximum R30,000 annual allowance, you can do this for nearly 17 years until you hit the threshold of R500,000.

The main benefit of using a tax-free savings account

The main advantage is that you won’t pay tax on any gains or income you make from it. Plus, if you plan to use this as a retirement savings vehicle, don’t withdraw anything from your account. This will let compounding work on your savings over the years.

If you have at least 17 years until you retire, it’s worth considering putting you tax-free allowance to use.

So there you have it. How to put your tax-free saving account to use for retirement.

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How to put your tax-free savings account to use for retirement
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