Maxing out RA?

[fire2029]

I currently contribute around 15% of monthly salary to RA.  Legislation allows me to contribute up to 27.5% or R350 000 - whichever is lower - assume the former

Should I look to max out RA and take advantage of the great tax breaks OR use the 15% to invest in a low-cost, equity ETF?

 

Has anyone ever run some numbers / models on which strategy would outperform if retirement is more than 20 years into future?

 

 

[Bandit]

I'm no expert but assuming you are far away from retirement age and as per user name you intend to be financially free by 2029, do you really want your money locked away in an RA?

 

Anyway, what I do is this:

1. Max out TFSA first
2. Contribute a percentage to pension (15%) because I can get this money out if we immigrate. Point is: I'll not be force to by an annuity one day and won't be subject to whatever unknown tax regulation there will be one day
3. I contribute a small amount to an RA every month to 1) offset any monies I might owe SARS come tax season and 2) just in case... 

Once I leave my current job I'm still in two minds on what I'm planning to do with my pension. Currently I'm leaning towards taking the tax hit, cashing it out and investing it offshore.

 

I trust this SA government and pension/RA money exactly f**ol.

[fire2029]

Great reply, Bandit... Unfortunately it is the road taken by many due to massive confidence issues reg our country's future! It feels like we are shooting ourselves in the foot, because the government will likely rip out our limbs anyway. 

 

Reg: do you really want your money locked away in an RA

A big portion of investments is meant for the very long-term. ie retirement. I will not be touching it until then. So taking advantage of the tax breaks and re-investing those tax savings does make sense... on the one hand.

 

On the other - I too am massively concerned about the future of this country. I might instead do some Section 12J investments to reduce my tax bills instead.

 

 

 

[Bandit]

18 hours ago, fire2029 said:

Reg: do you really want your money locked away in an RA

 

I should've qualified that with "Do you really want your money locked away in an RA in South Africa at the mercy of our lawmakers?"

 

[Bandit]

18 hours ago, fire2029 said:

On the other - I too am massively concerned about the future of this country. I might instead do some Section 12J investments to reduce my tax bills instead.

 

 

I'm not rich enough for that to be an option

[fire2029]

1 hour ago, Bandit said:

 

I'm not rich enough for that to be an option

 

Hmmm - I also thought so, but there are section 12j investments which start as "low as R100k".

[Bandit]

34 minutes ago, fire2029 said:

Hmmm - I also thought so, but there are section 12j investments which start as "low as R100k".

 

Yeah but is there going to be any real benefit? Assuming you're an average South African with debt (car, house) you may do better by paying that off first, no? You'll save on interest and the "gain" you get is also effectively tax free.

[fire2029]

1 hour ago, Bandit said:

 

Yeah but is there going to be any real benefit? Assuming you're an average South African with debt (car, house) you may do better by paying that off first, no? You'll save on interest and the "gain" you get is also effectively tax free.

Yes agree if you believe the rate which have you on your bond or car loan will be higher than rate of return you will achieve on your investment; then agree.