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QUESTION: I have only five years left before retirement, but I do not have enough retirement funds. What advice can you provide to help me save to help augment my pension?
ANSWER: Carel Basson, Private Client Wealth Manager at Alexander Forbes Financial Planning Consultants in Stellenbosch, says it is never too late to put as much as possible into retirement savings, although the sooner you start, the better.
Possibilities include distinguishing between investments done on a before tax basis (Pension Funds, Provident Funds and Retirement Annuities) compared to investments done on an after tax basis (any other form of investment not named previously).
Investments done on a before tax basis, will be entitled to certain tax deductions on the contributions. There is also the benefit that there is no tax on such an investment because of a tax moratorium. It is important to note that these types of investments need to adhere to certain laws, which limits the accessibility to such investments. The minimum retirement age for access is 55.
Investments done on an after tax basis will receive no tax deductions on the contributions made and tax will also be levied within such investments. Such investments can however be accessed at any stage. It will be important to make use of both types of investments.