Don't miss out on the peace of mind that a TFSA can provide

I'm sure by now you've heard of TFSA (that’s Tax-Free Savings Account). This is a powerful little investment tool. 

I've had my Tax Free Savings Accounts for a year now. And I have to say it's one of the most prudent financial decisions that I have made so far. It’s really an investment account, not a savings account as the name would suggest.

The true beauty of the TFSA comes with time and compounding interest. If there's anything I have learned since I first started investing, disciplined investing in retirement accounts accumulates compounded wealth as time goes on!

So if you plan to actually invest your money instead of getting that pitiful 0.5% at your local bank, now is the time to make your move and get yourself a TFSA account. Don't miss out on the peace of mind that a TFSA can provide.

So what are the benefits of TFSA: 
  • You pay no tax on your investment growth or when you take your money out.
  • You pay no tax on dividends, capital gains or interest.
  • You may withdraw money from your investment at any time.
  • It is advisable to remain invested for at least three to five years.
  • It is the perfect way to start growing an easily accessible emergency fund.
Who can open one and how much money can I put in there?
Any South African resident over the age of 18 can open a TFSA.  The amount you can put in—your contribution room—is based on a yearly limit that’s the same for everyone. Contributions aren’t tied to your income so you don’t need earned income to contribute.

How much is TFSA
Your monthly limit is R2750 over a month, a total of R33 000 a year. 

Can I take money out and put money back in?
Yes... but you have to be careful about the timing of your withdrawals and contributions. If you withdraw money from your TFSA you can’t recontribute that amount back until the following calendar year. 

Can I have more than one TFSA?
Yes you can! You can have as many as you want at as many financial institutions as you want. Just remember that your contribution room is cumulative.  Although you can have multiple TFSAs, you’re probably better off keeping things as simple as possible. 

Can I move my TFSA from one financial institution to another?
Yebo! Just note that financial companies might charge a transfer fee to move your account. You’ll want to ask what that is so you don’t have any surprises.

Do reinvestments or dividends count as a contribution?

Reinvestments of returns or dividends will not count as contributions as long as they are not withdrawn and reinvested.

Which accounts will qualify as TFI?
  • Fixed deposits
  • Unit trusts (collective investment schemes)
  • Retail savings bonds
  • Certain endowment policies issued by long-term insurers
  • Linked investment products
  • Exchange traded funds (ETFs) that are classified as collective investment schemes.
South African Revenue Service (SARS) rules
  • Contribution limits 
  • Your combined limit for the financial year (1 March – 28 February) across all tax-free savings accounts, including those at other financial services providers, is R33 000
  • Lifetime limit is R500 000
  • Contributions over these limits are taxed at 40%
A tax-free savings account can only be opened for an individual. You can open one for each individual in a family, but cannot open one in the name of a trust or a company.

Don't miss out on the chance for tax-free growth and peace of mind that a TFSA can provide.

Source: SARS

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