MONEY CLINIC | Can I make a fraction of my retirement fund accessible during Covid-19?

accreditation
0:00
play article
Subscribers can listen to this article
(iStock)
(iStock)

A travel agent currently not earning a salary wants to know if it is possible for her to access a percentage of her retirement annuity during Covid-19.

She writes:

I have a retirement annuity that pays out when I’m 55 (this from a company that I’m no longer employed with). I am an independent travel agent working from home and would like a percentage of this to be made available while I am currently not earning a salary due to the travel ban and coronavirus. Is this possible? 

Brett Mackay, Investment Consultant and the Group RA Manager at 10X Investments, answers: 

The rules of a retirement annuity do not allow an individual to access their fund unless the fund value is below R7 000 or the individual is financially emigrating. Otherwise, 55 is the earliest age at which an individual can access the funds in a retirement annuity. 

If you were still employed by the company you would also not be able to access the funds before age 55. This may be frustrating now, but it is in your best interests for a number of reasons, as the compounding effect of your returns will set you up nicely in the long run. 

Retirement investments are restricted as they are meant to be for your retirement only. These funds are ring-fenced so that you cannot access them until you are older when you will, in all likelihood, be very glad that your younger self was not able to access them. 

Even if you were able to access some of your retirement funds it would not be advisable. You would have to sell equities or other assets that are geared for long-term growth and this would have a negative effect on your end value at retirement.

The way an investment grows over time is that the longer you leave the money invested, the faster the rate of growth. Withdrawing the funds early would not only rob your older self of the income it is designed to provide, but it would also rob you of its greatest growth potential. 

Questions may be edited for brevity and clarity.

  • Have a money problem that needs solving? Fin24 can help! Send your question to editor@fin24.com

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

Get the biggest business stories emailed to you every weekday.

Go to the Fin24 front page.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
15.04
-1.1%
Rand - Pound
20.67
-1.0%
Rand - Euro
17.44
-1.1%
Rand - Aus dollar
11.30
-1.4%
Rand - Yen
0.13
-1.5%
Gold
1,795.25
+0.2%
Silver
24.13
-0.1%
Palladium
1,985.00
-1.6%
Platinum
1,019.00
-1.2%
Brent Crude
86.40
+0.5%
Top 40
60,797
-0.3%
All Share
67,475
-0.2%
Resource 10
63,048
-0.9%
Industrial 25
87,148
+0.1%
Financial 15
14,043
+0.2%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Voting Booth
Facebook is facing a fresh crisis after a former employee turned whistle-blower leaked internal company research . Do you still use Facebook?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes, the benefits outweigh the risk for me
26% - 347 votes
No, I have deleted it
44% - 580 votes
Yes, but I am considering deleting it
30% - 390 votes
Vote