The beginning of a new year is the perfect time to think ahead. With the right mindset and plan in place, you can turn these milestones into opportunities to make smart financial choices that support a comfortable and worry-free retirement.
According to André Wentzel, Solutions Manager: Recurring Savings, you should pay attention to these key events during 2020:
- National Budget Speech: 26 February 2020
Make sure you understand how the government’s plans for 2020 affect your personal finances. Any changes to the income tax bands and actual marginal tax rate could impact your tax benefits on your contributions to an RA and other retirement products. Currently, the maximum tax deduction you are eligible for in a tax year is capped at a 27.5% investment of your annual taxable income (limited to R350 000 per year) in a retirement fund. If this limit increases, you could save more for retirement in a more tax-efficient way.
- Tax Year End: 29 February 2020
If you plan on topping up your RA or tax-free savings account to benefit from tax concessions, be sure to do so well before 29 February. Make sure you know the closing dates for your provider/s to allow enough time for processing.
Also note that your retirement contributions need not be limited by the annual tax deductibility cap. While you won’t get a tax benefit for anything you save above the limit this year, it will become eligible in future years.
- Opening of Tax Filing Season: 1 July 2020
Have all your documentation ready to submit your income tax return early and get faster access to any refunds, including the amount you get back for topping up your RA in February. If you do get a refund, consider reinvesting it into your retirement savings to really maximise your tax benefit.
- Annual Salary Increase Time
Annual increases help manage the rising cost of living, but if you get a higher-than-inflation increase, it can be easy to fall into the expense creep trap*.
It may be smarter to maintain your current lifestyle and save your excess income for retirement. Either way, be sure to maintain your retirement contributions in real terms. For example, if you currently save R2 000 per month into an RA and keep your contributions the same, you will save less in real terms (due to inflation and the rising cost of living). Make sure you contribute at least the same proportion of your salary towards your retirement fund after an increase – or more if you can.