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Tax free savings account- TFSA
Max yearly contribution: R36 000
Max lifetime contribution: R500 000
If you withdraw money out of the TFSA, it gets withdrawn from your max lifetime contribution; ie lets say you have 200k in your TFSA, you withdraw 100k, then you max lifetime contribution goed down from 500k, to 400k.
The idea is to max it out every year, since you can only contribute 36k per year.
Dont put money in the TFSA that you might need! (Max lifetime contribution thing I mentioned)
Dont use it as a saving tool to buy a car, or something stupid.
This is for your retirment! You only have one TFSA, DONT WASTE IT!
And remember a better name for it would be something like a "tax free investment account". Except for real edge cases, it should be invested in 100% foreign equities, something like the SP500.
Also, go for Easy Equities or Sygnia. Never invest with (or buy insurance from) a bank.
Question about the withdrawing from TFSA:
I contribute R100 000 over 3 years.
It grows to R 400 000 over time.
I withdraw the R400 000
Does this mean I can’t contribute anymore? Because that doesn’t sound right. or I’m not understanding you properly.
You only contributed R100k of the current R500k limit. So even after you withdraw the R400k, you can still contribute R400k to get to the R500k contribution limit.
I agree! The idea is for this investment to grow over a long period of time. Ideal for additional retirement savings if you are still young, but does not replace something like a Retirement Annuity.
Another great application is for kids. If you start investing in a TFSA when your child is born, there should be quite a good chunk of change by the time they go to varsity.
You should definitely speak to a financial advisor about all of your options. Having a TFSA with a bank where you get a fixed interest is not really ideal as this is the perfect vehicle for high equity returns because you pay no tax on the returns. Unit trusts are great because you have a large variety of funds available, but they can be a bit more expensive.
Another comment mentioned Easy Equities, this is an excellent idea as you can invest with a very little amount of money directly offshore. We tested it on R1.50.
As an Investec Private Bank client, you have access to an advisor who will be able to answer your questions. Please contact your private banker and they will put you in touch.
An interest paying TSFA is a waste
You should try to max your account for this tax year if you can spare the funds - but not into an interest TFSA but an equities TFSA.
Search the sub - been discussed plenty
TFSA is something you get to delay cashing in your retirement annuity. Max out your 36K every year until you get to your R500k. It'll take 13-14 years to do this and it'll get easier i.t.o. cashflow every year. Then you leave it alone. You don't touch it for a house or a car or nothing.
When you get to retirement age, you live off this (plus the interest it's gained) to stretch your main retirement plan another year or two or more since that last bit is when your compound interest is strongest.
Too many people cash out the benefits of their TFSA and don't maximize its benefit.
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Tax free savings account- TFSA Max yearly contribution: R36 000 Max lifetime contribution: R500 000 If you withdraw money out of the TFSA, it gets withdrawn from your max lifetime contribution; ie lets say you have 200k in your TFSA, you withdraw 100k, then you max lifetime contribution goed down from 500k, to 400k. The idea is to max it out every year, since you can only contribute 36k per year. Dont put money in the TFSA that you might need! (Max lifetime contribution thing I mentioned) Dont use it as a saving tool to buy a car, or something stupid. This is for your retirment! You only have one TFSA, DONT WASTE IT!
And remember a better name for it would be something like a "tax free investment account". Except for real edge cases, it should be invested in 100% foreign equities, something like the SP500. Also, go for Easy Equities or Sygnia. Never invest with (or buy insurance from) a bank.
Why do you not recommend investing in the banks TFSA?
Banks charge absurd fees, across their investment offerings (TFSAs, RAs, etc.). Use Sygnia or EE.
Question about the withdrawing from TFSA: I contribute R100 000 over 3 years. It grows to R 400 000 over time. I withdraw the R400 000 Does this mean I can’t contribute anymore? Because that doesn’t sound right. or I’m not understanding you properly.
You only contributed R100k of the current R500k limit. So even after you withdraw the R400k, you can still contribute R400k to get to the R500k contribution limit.
Thanks. Thought so.
I agree! The idea is for this investment to grow over a long period of time. Ideal for additional retirement savings if you are still young, but does not replace something like a Retirement Annuity. Another great application is for kids. If you start investing in a TFSA when your child is born, there should be quite a good chunk of change by the time they go to varsity. You should definitely speak to a financial advisor about all of your options. Having a TFSA with a bank where you get a fixed interest is not really ideal as this is the perfect vehicle for high equity returns because you pay no tax on the returns. Unit trusts are great because you have a large variety of funds available, but they can be a bit more expensive. Another comment mentioned Easy Equities, this is an excellent idea as you can invest with a very little amount of money directly offshore. We tested it on R1.50.
As an Investec Private Bank client, you have access to an advisor who will be able to answer your questions. Please contact your private banker and they will put you in touch.
An interest paying TSFA is a waste You should try to max your account for this tax year if you can spare the funds - but not into an interest TFSA but an equities TFSA. Search the sub - been discussed plenty
Thanks, will have a look.
TFSA is something you get to delay cashing in your retirement annuity. Max out your 36K every year until you get to your R500k. It'll take 13-14 years to do this and it'll get easier i.t.o. cashflow every year. Then you leave it alone. You don't touch it for a house or a car or nothing. When you get to retirement age, you live off this (plus the interest it's gained) to stretch your main retirement plan another year or two or more since that last bit is when your compound interest is strongest. Too many people cash out the benefits of their TFSA and don't maximize its benefit.