A retirement annuity or a tax-free savings account could both do the job for young investors seeking to start putting money away for their retirement.

Listen to this article 4 min Listen to this article 4 min Question: I am 30 years old and earn R 20,000 a month. I have no savings whatsoever and want to start putting some money away for my retirement. How do I go about doing this?

Answer: There are two investment vehicles that are worth considering: a retirement annuity and a tax-free savings account (TFSA).

Retirement annuity

A retirement annuity is a long-term investment that is designed to provide you with an income when you retire. Positive features include that premiums are tax-deductible and growth is tax-free.

Your contributions are tax-deductible within certain limits. In your case, if you invest R2,000 a month in a retirement annuity, you will get a monthly tax break of around R380. This is the equivalent of an immediate return of 19%. The growth inside the retirement annuity does not attract any tax.

However, there are negatives. You cannot easily access the funds in your retirement annuity before you turn 55. If you make a withdrawal from the fund under the new two-pot system, the withdrawal amount will be taxed at your marginal rate.

At least two-thirds of the investment value of your retirement...