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<\/a><\/figure><\/div>\n\n\nMany South Africans are receiving year-end bonuses, with wealth and property experts stating that these funds can be used for long-term goals.<\/p>\n\n\n\n
Thomas Berry, Head of Sales at PSG Wealth, said that many South Africans use their year-end bonuses as a way to exhale by catching up on debts or spending a bit more over the festive season. <\/p>\n\n\n\n
However, Berry said that it is a good idea to focus on shifting this short-term fulfilment to long-term gain.<\/p>\n\n\n\n
South Africans have been advised that instead of setting up a bonus, they should view it as a wealth accelerator. <\/p>\n\n\n\n
Via investing in a portion in the \u201cright way,\u201d one can fast-track their progress towards long-term goals, including home, education, or even an earlier retirement. <\/p>\n\n\n\n
The key lies in how South Africans use the tools available to them, especially retirement annuities (RAs) and tax-free savings accounts (TFSAs). <\/p>\n\n\n\n
Both offer tax-free growth while one\u2019s money remains invested, which means that there is no tax on the interest, dividends or capital gains in either of these investment vehicles. <\/p>\n\n\n\n
Paying less tax on your investments means that they compound faster. <\/p>\n\n\n\n
In a retirement annuity, one can deduct up to 27.5% of their taxable income each year (capped at R350,000), effectively lowering their tax bill while building their retirement fund. <\/p>\n\n\n\n
Those tax savings can then be reinvested to further accelerate growth. Access is also limited until retirement age, typically 55. <\/p>\n\n\n\n
TFSAs, on the other hand, are better suited for medium-term goals, with an annual contribution limit of up to R36,000, subject to a lifetime limit of R500,000. <\/p>\n\n\n\n
Berry said that TFSAs are well-suited for goals such as funding a child\u2019s education, paying a home deposit or creating a safety net for future expenses.<\/p>\n\n\n\n
However, withdrawals permanently reduce your contribution limit, so it is essential to plan carefully before making any withdrawals.<\/p>\n\n\n\n
TFSAs are also allowed to invest across asset classes, without the restrictions that apply to RAs via Regulation 28. <\/p>\n\n\n\n
This enables South Africans to tailor their investment strategy to their specific goals and risk appetite. <\/p>\n\n\n\n
Saving doesn\u2019t mean one has to stop spending on life\u2019s pleasures; even small amounts saved can still compound. That said, the earlier you start, the better.<\/p>\n\n\n\n
Those who start saving R500 per month from the age of 20 will have roughly the same amount as those who invest R2,500 per month from 35. <\/p>\n\n\n