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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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

“Make sure you contribute at least the same proportion of your salary towards your retirement fund after an increase – or more if you can,” says André Wentzel, Solutions Manager: Recurring Savings at Sanlam.

  1. Bonus Season

    If you are eligible for an annual bonus in 2020, keep your retirement goals in mind. Yes, you deserve to reward yourself for a job well done, but you also have to remember there’s no bonuses or thirteenth cheques in retirement. So, consider using part of your bonus to treat yourself now and put some away for retirement.

  2. Considerations for Freelancers and Contractors

    If you are freelancing, contracting or earning extra from a ‘side hustle’, plan for the following:

    • Freelancing means you are fully responsible for saving for your own tax. If you’re a provisional taxpayer, save a portion of your monthly income in an interest-earning vehicle to be prepared for the two big annual tax payments due on 31 August 2020 and 28 February 2021.
    • Establish what your average monthly income is in a typical year; and during months when you earn more than the average, use the excess to top up your retirement savings or an emergency fund for leaner months.

All this considered, it makes sense to carefully plan your personal finance journey for the year ahead. Consult your financial adviser to assess your retirement goals and adjust your savings plan to capitalise on all opportunities in 2020. Being well-prepared and making smarter choices will help ensure lifelong financial wellness.

*When you spend more on discretionary expenses the more your disposable income rises.



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