South Africa's new two-pot retirement system is set to launch on Sunday and retirement savers will be faced with a critical choice.
South Africa's new two-pot retirement system is set to launch on Sunday and retirement savers will be faced with a critical choice.While millions of South African pension fund members are waiting for next week to withdraw some of their retirement savings under the two-pot retirement system to fill a few financial gaps, experts are urging them to think twice and consider the long-term value of not withdrawing.
He says you should think of your retirement savings as a forest of trees. “Each contribution you make to your retirement fund is like planting a new seedling. Over time, these trees grow and produce more seeds, expanding your forest so that you will eventually have enough financial ‘timber’ to live off once you retire. The two-pot retirement system essentially gives you the option to harvest some of that wood before retirement age.
And if you can leave it for 30 years, your patience will be rewarded with growth to a staggering R228 000, nearly eight times your original vesting amount and you will not have to do anything other than resist the temptation to withdraw from it, Khwela says.“But if you choose to withdraw the maximum R30 000 after 1 September, the South African Revenue Service will also take its share.
Exploring alternative financing: If you urgently need funds, consider speaking to your bank about a personal loan at a competitive interest rate. It means you will have to pay the money back with interest, but the long-term value of leaving your retirement savings untouched will far exceed these costs.
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