A Fin24 user who is already retired wants to know about tax breaks and access to funds. He writes:
I am over 65 years of age and have already retired. Last year I had an income of about R300 000 including interest, earnings from a formal job (PAYE paid).
As none of this income was retirement funding, is it correct that I can put away 15% (R45 000) in a retirement annuity and get a tax break? And how soon can I take it out again?
Paul Jennings, a CFP® Professional, Private Wealth Manager at NFB Financial Services Group responds:
You are correct in that you are able to contribute up to 15% of your non-retirement funding income into a retirement annuity and receive a tax break. This is however based on your gross income (before PAYE paid) which would allow for contributions in excess of the R45 000.
These contributions have to be made before tax year end (end of February) meaning that you will have to start afresh and base this calculation on income received this year in order to receive a tax break for the 2014/2015 tax year.
Being over 55 years of age, you will immediately be able to a withdrawal from this retirement annuity. This means that you will be entitled to a ‘Retirement Lump Sum Benefit’ of one third of the value of the retirement annuity with the balance providing you with a living annuity.
You have a further choice as to the amount of this living annuity which can be between 2.5% and 17.5% of the remaining value of your retirement annuity. This annuity is considered income in your hands which will be taxable.
Annually, on the anniversary of your retirement annuity, you can elect the percentage annuity you require for the following year.
One other matter for your consideration is that ‘Retirement Lump Sum Benefit’ is taxed as per the table below plus it is noted that from 1 October 2007 this accumulates from previous retirement lump sum benefits taken.
As this cannot be construed as formal financial advice it would be in your interests to contact an Independent Financial Advisor who will be able to provide professional guidance with regards to your entire financial plan.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
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.
I am over 65 years of age and have already retired. Last year I had an income of about R300 000 including interest, earnings from a formal job (PAYE paid).
As none of this income was retirement funding, is it correct that I can put away 15% (R45 000) in a retirement annuity and get a tax break? And how soon can I take it out again?
Paul Jennings, a CFP® Professional, Private Wealth Manager at NFB Financial Services Group responds:
You are correct in that you are able to contribute up to 15% of your non-retirement funding income into a retirement annuity and receive a tax break. This is however based on your gross income (before PAYE paid) which would allow for contributions in excess of the R45 000.
These contributions have to be made before tax year end (end of February) meaning that you will have to start afresh and base this calculation on income received this year in order to receive a tax break for the 2014/2015 tax year.
Being over 55 years of age, you will immediately be able to a withdrawal from this retirement annuity. This means that you will be entitled to a ‘Retirement Lump Sum Benefit’ of one third of the value of the retirement annuity with the balance providing you with a living annuity.
You have a further choice as to the amount of this living annuity which can be between 2.5% and 17.5% of the remaining value of your retirement annuity. This annuity is considered income in your hands which will be taxable.
Annually, on the anniversary of your retirement annuity, you can elect the percentage annuity you require for the following year.
One other matter for your consideration is that ‘Retirement Lump Sum Benefit’ is taxed as per the table below plus it is noted that from 1 October 2007 this accumulates from previous retirement lump sum benefits taken.
As this cannot be construed as formal financial advice it would be in your interests to contact an Independent Financial Advisor who will be able to provide professional guidance with regards to your entire financial plan.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
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.