Should you use a TFSA for retirement?

Was wondering at our age how much tax benefit there is if we only reach our R500k limit just before age 60 – will it do much appreciation to justify any tax benefits?

This question was posed to me a few days ago.

Using the TFSA is a great savings vehicle that I encourage every single South African to have. Your contributions are capped at R500 000, but the growth is unlimited. Thinking by way of example to show you the benefits, see below with some assumptions:

An investor contributes R36 000 per annum (current limit). It will take approx. 14 years to reach the (current) limit of R500 000. I say current, as the lifetime limit will increase (but to keep it simple, let’s assume not).
Now if that investor has growth assets in their TFSA, like an offshore ETF, with a yield of 12% per annum, in 14 years, their TFSA could have a balance of R1 240 620. However if that investor leaves their funds until they are 60, which is 17 years away, that pot could now be worth, R1.8m and if they left it to 65 it could be worth R3.5m – ALL TAX FREE 😊

At this point the investor says, they want to retire, they can draw a monthly income from this R3.5m pot TAX FREE, whilst the rest of their portfolio continues to grow.

So in closing, I do believe it to be extremely beneficial and do still recommend having a TFSA.

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