Before delving into your retirement savings, you would do well to consider factors such as long-term returns, capital gains tax and fund growth
Question: I recently saw a YouTube clip in which a financial planner recommended using the two-pot system to withdraw funds from retirement savings. This seems to fly in the face of all the advice I've received in the past. What are your views?
Answer: I had a look at the video. The financial planner argues that the JSE has underperformed in dollar terms against foreign stock exchanges. Because retirement funds are constrained by regulation 28, which limits offshore exposure to 45%, the returns on your savings would be a lot better if you were able to invest the funds elsewhere.
The example that she uses is that of someone earning R370,000 a year and taking out R25,000 from the retirement funds. This R25,000 will attract R7,725 in tax, giving you a net investable amount of R17,275.
She says you should be able to get a return of 15% a year on your investments. If you achieve this on the R17,275, you will reach the R25,000 mark within three years and after that you will be doing a lot better than you would have done in a retirement fund....
