Reasons to Increase Your Retirement Annuity Contributions

By Sunday, every salaried professional in the country will have an auto-assessment. Most will make the same R32,800 mistake by February. Not on the assessment itself. After it. Here's the pattern I see every year: you check the assessment, file, get the refund, and consider tax "done" until next July. That's the mistake. The most expensive month in South African tax isn't July. It's February, when people scramble a lump-sum RA top-up they can no longer afford, or skip it entirely. Because while you were looking backwards, the rules moved forwards. On 1 March, SARS lifted the cap on tax-deductible retirement contributions from R350,000 to R430,000. First increase in ten years. The 27.5% rule stayed the same. Your assessment won't mention it, it covers the year that's already closed. Save this and check five things: Your real contribution percentage, payroll fund PLUS private RA, combined. Most people have never added them up. Your room: 27.5% of the greater of your remuneration or taxable income. The cap: R430,000 a year now. If you earn above roughly R1.27m, the old cap was pinching you. Above R1.56m, you have the full R80,000 of new room. The tax effect: at a 41% marginal rate, using that room saves you up to R32,800 this year. At 45%, R36,000. The timing: eight months left in this tax year. Structured monthly from August beats a February panic every time. One honest caveat: an RA locks your money until 55. Whether that R80,000 belongs there or somewhere more flexible is a structure decision, not a product decision. That's the entire point of having a plan. The refund is the rear-view mirror. This is the windscreen. When did you last check your actual contribution percentage, this year, or the day you signed the form? I break down one structuring decision every week. Newsletter link on my profile.

The secret advantage high-income South Africans overlook in retirement planning The more I work with high earners, the more I see a pattern. Success brings rewards, but also complexity. South Africa quietly rewards those who plan with intent, yet many professionals still hand over more to SARS than they need to. I often remind clients that structure matters. You may deduct up to 27.5 percent of taxable income (capped at R350 000) through retirement contributions. At a 45 percent tax rate, that’s a R157 500 saving every year. Even contributions above the cap aren’t wasted, they roll forward and later increase your tax-free portion at retirement. With the new Two-Pot system, one-third of new contributions now flows into a savings pot, accessible once per tax year. Withdrawals are taxed at your marginal rate, which makes them costly for top earners. I treat that pot as an emergency reserve only, never a convenience fund. Your Tax-Free Savings Account remains one of the best-kept secrets for long-term investors. You may invest R36 000 per year up to a lifetime limit of R500 000. Growth, dividends, and withdrawals are completely tax-free. Over time, disciplined contributions can build a valuable pool of flexible, untaxed capital alongside your retirement funds. When you change employers, always preserve your savings. Transferring to a preservation fund or retirement annuity keeps compounding uninterrupted and avoids unnecessary tax. Cashing out can cost you years of growth. At retirement, the right income structure depends on your circumstances. Some clients prefer a living annuity for flexibility and legacy planning, others value the certainty of a life annuity, and many benefit from a hybrid combination that blends both. With the correct beneficiary nominations, these benefits often fall outside your estate, protecting family capital and improving estate liquidity. And finally, giving remains part of good planning. Donations to approved PBOs under Section 18A are deductible up to 10 percent of taxable income, a meaningful way to support what matters to you while reducing your tax bill. True wealth lies in how you align your income, contributions, and timing , so that every rand serves your life, not the taxman.

What is the number one thing killing retirees today? Most people would say poor health, or bad luck, or genetics. But new research from the National Bureau of Economic Research points to something far more controllable: financial stress. The NBER studied nearly 600,000 retirees in Chile over 18 years and found that retirees who chose guaranteed lifetime income through annuities were about 3% less likely to die over the following decade. The reason? Annuities reduce mortality by shielding retirees from income volatility and investment-related stress. Annuitants invest more in their health. They report lower disability rates. They live better — and they live longer. Here is how one researcher explained it: the simplicity of a lifetime income account provides a feeling of security that improves mental well-being and empowers retirees to spend money on things that actually increase their longevity. When clients stop worrying about whether their money will run out, they start investing in themselves. They go to the doctor. They exercise. They eat better. They sleep better. The guaranteed paycheck is not just a financial tool. It is a health tool. I personally own 13 income annuities. I own them because the math demands it. Now there is evidence the biology demands it too. Read the full article and share it with every client sitting on the fence: https://lnkd.in/gDhagiZJ #Annuities #RetireHappy #PaychecksAndPlaychecks #AnnuityResearch