Tips to maximise your retirement savings

702's Gugs Mhlungu spoke to resident certified financial planner, Paul Roelofse.

Listen to their conversation in the audio clip below.

As you get closer to your 40s and 50s, planning for retirement starts to feel more urgent. 

Many people begin to look closely at their finances to make sure they can enjoy the lifestyle they desire when they stop working.

Roelofse says one smart way to save for retirement is by investing in a retirement annuity (RA) and a tax-free savings account (TFSA). 

He adds that these options can help you grow your savings while saving on taxes. 

Roelofse explains that when you put money into an RA, you can reduce the amount of income that is taxed, which means you might get some money back at tax time. 

He goes on to say that this refund can then be invested in a TFSA, giving your savings an extra boost.

"We're leaning on a very big advantage of tax savings."

- Paul Roelofse, certified financial planner

"We don't spend the tax that we save in terms of refund, we rather put it back into a similar investment and run the two concurrently." 

- Paul Roelofse, certified financial planner

Roelofe provides an example of how much value you can unlock by playing the tax game:

Let’s say you contribute R15,000 every year (which is R1,250 each month) to your RA for 20 years, and it earns about 10% interest each year. After two decades, your total investment would grow to around R904,983. If you’re in the 30% tax bracket, you could receive about R4,500 back each year, which you can then put into your TFSA. Over the same 20 years, this TFSA would grow to around R271,495.

He says that by using both investment options together, you could have a total of R1,176,478 saved by the time you retire. You can take out R392,159 tax-free from part of your RA and R271,495 from your TFSA. Altogether, that adds up to R663,654 in tax-free cash. Plus, your RA can provide you with a pension of R512,823.

Roelofe believes this approach pays off.

With an initial investment of R300,000, you could maximise your tax benefits and end up with nearly four times what you invested. On top of that, thanks to the tax refund from your RA, Roelofse says you would get more than half of your money back tax-free.

Scroll up to listen to the full conversation.