On the back of Covid-19, and the widespread financial difficulties that many people experienced as a result of two years of lockdowns, some South African employees opted to resign from their jobs in order to access their retirement savings.
On the back of Covid-19 and the widespread financial difficulties that many people experienced due to two years of lockdowns, some employees opted to resign from their jobs to access their retirement savings.
“For one, there are significant tax implications if you choose to take your benefit as a lump sum. You will only receive a tax-free amount of R25,000, and the remainder of your benefit will be taxed on the withdrawal benefit tax table. Giese said that when you withdraw your retirement savings early, you’re not just taking money from your retirement, you’re also taking time, and that means you effectively lose out on all the growth and compound interest that money would have earned if it had stayed invested until your official retirement date.
Giese said that by lumping retirement savings, fixed-term and call accounts, day-to-day savings vehicles, emergency savings, tax-free savings and even many forms of investments together under the banner of ‘savings’, a misperception has been created that all these savings vehicles are more or less the same.
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