MONEY CLINIC | Will my retirement payout be taxed, even if I was taxed while working?

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There is a specific legislated scale upon which your benefits are taxed at retirement.
There is a specific legislated scale upon which your benefits are taxed at retirement.
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A Fin24 reader looking to cash in his retirement savings wants to know the tax implications.

He writes:

I'm 57 years old and I took early retirement last year in October because of Covid-19 regulations. Now I want to cash in my money held by Alexander Forbes. My question is, will this money still be taxed, even if I was taxed every month while I was working? 

Belinda Sullivan, Head of Corporate Consulting Strategy at Alexander Forbes responds:

I am assuming that the reader remained paid up in the fund and is now opting to make his retirement selection.

Firstly, we have to differentiate between taxable income, i.e., the tax applicable to the monthly salary you earned from your employer, and the tax applicable to the accumulated money you saved in your retirement fund. As a retirement fund member, there would have been certain tax deductions that you enjoyed while contributing to the fund for all the years that you were employed. There is a specific legislated scale upon which your benefits are taxed at retirement. 

This allowance is a once-in-a-lifetime allowance across all your retirement benefits, not just the money in your current retirement fund, but if you have a retirement annuity and preservation money. Note that this allowance also considers any previous withdrawals of benefits from any previous employer and/or retrenchment monies received. 

Remember the amount that you can access as a lump sum and the options available to you will be dependent on the type of fund that you were on and the rules applicable to the fund. There are many options available to you at retirement.

It is always important to get advice from a certified financial planner to help you to work through the most suitable option for your personal circumstances. 

Questions may be edited for brevity and clarity.

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