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

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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.

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