Most people assume retirement saving is about how much money you put away. When you're under 35, it's mostly about time. The earlier you start, the less money you need to contribute later to end up in the same place.
That doesn't mean an RA should automatically be your next financial move. If you're carrying expensive debt, living payday to payday, or don't have any emergency savings, there are a few boxes worth ticking first.
But if those basics are in place, even a small contribution can get the ball rolling.
If you're paying 20% or more on a credit card, store account or personal loan, that's probably costing you more than your investments are likely to earn.
Clearing expensive debt gives you a guaranteed improvement to your financial position. Once that's sorted, you can redirect those repayments into long-term investing.
That's common when you're starting out.
If you're below the income tax threshold, the RA deduction doesn't offer much value because you're not paying income tax yet.
In that situation, a TFSA may be a better place to start.
Once your income increases and you're paying tax, an RA becomes more attractive because the tax deduction starts working in your favour.
The good news is that you don't need a massive contribution to get started. Consistency matters more than impressing yourself with a big first deposit.
A fair question. Your emergency fund should handle emergencies and your RA should handle retirement. Those are two different jobs.
Before building retirement savings, aim to have a cash buffer that covers around three months of expenses in an accessible account.
That way, when your car needs repairs or your fridge gives up, you aren't forced to raid long-term investments.
The two-pot system does allow limited access to part of your retirement savings, but withdrawals are taxed and reduce the amount you've got working for your future.
Good. Keep it.
A TFSA and an RA solve different problems.
A TFSA gives you tax-free growth and flexibility.
An RA gives you tax-free growth and a tax deduction on contributions.
Many investors eventually use both.
In fact, EasyRetire Head of Retail Higgo's personal approach is to put his RA tax refund into his TFSA.
"The RA helps me reduce tax now, while the TFSA gives me another pool of money that can grow tax-free. Different products, one plan."
An RA isn't designed to be your speculative account. Retirement annuities are governed by Regulation 28, which limits how much can be invested in equities and offshore assets.
The idea is to encourage diversification rather than concentration. That doesn't mean you can't invest in higher-risk opportunities. It just means they probably belong somewhere else.
Many younger investors use an RA as their retirement foundation and then build separate portfolios in their EasyEquities ZAR, USD, EUR or Crypto accounts for ideas they feel strongly about.
If you're under 35, your priorities might look something like this:
Clear expensive debt
Credit cards, store cards and personal loans first.
Build an emergency fund
Aim for roughly three months of expenses in an accessible account.
Use your employer retirement benefits
If your employer contributes to a pension or provident fund, make sure you're taking full advantage of it.
Start a TFSA
Even a few hundred Rand a month can go a long way over time.
Add an RA
Once you're paying tax and have the basics covered, an RA becomes a useful addition.
Increase contributions when your salary increases
Future salary increases are often the easiest source of extra retirement contributions because you don't feel the difference as much.
A lot of people delay investing because they think the amount is too small to matter. It isn't.
At an assumed return of 10% a year, R200 a month invested from age 25 to 65 could grow to roughly R1.26 million. Increase that to R500 a month and the figure rises to roughly R3.16 million.
Starting small creates momentum. Most investors don't fund their retirement with the contribution they started with. They increase it over time as their income grows.
Illustrative example. Returns are assumed for explanation purposes and are not guaranteed. Actual outcomes depend on market performance, fees, contributions and your tax position.
An RA probably isn't your next move if:
Retirement investing works best when it's built on a solid financial foundation.
Opening an RA on EasyEquities takes about ten minutes.
Choose Retirement Annuity in the app, complete your FICA verification, select your investment and make your first contribution.
You can start with as little as R5 and increase your contributions whenever you're ready.
You can transfer it to EasyEquities through a Section 14 transfer. If you've been meaning to review old retirement products, it's worth checking what you're paying in fees and whether they're still working for you.
Your future retirement isn't decided by one big contribution. It's shaped by hundreds of small decisions made consistently over time.
The first one is usually the hardest.
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