simply go into a TFSA, a simple switch that will net me a better long-term return as I won’t have to pay any tax on the dividends. More importantly, I also won’t have to pay taxes when I sell them during my retirement.
Another important issue is that one cannot transfer existing holdings into a TFSA. You can only deposit cash and then buy the ETF. So if you have say R30 000 of ETFs you want to put into your TFSA you’ll have to sell them and then transfer the cash and buy them again. The sale of course may attract CGT, but remember you have an annual R30 000 of CGT that is tax free every year. So there will be some transaction costs, but that isn’t the end of the world.
Wit h d r a wa l s a r e i mpor t a nt considerations and they are allowed within these TFSAs. However any monies withdrawn cannot be added back. So if you have put in your full R500 000 allotment and you withdraw say R25 000, you cannot add t hat R25 000 back into the TFSA. So you should only make withdrawals in the event of an extreme emergency or at retirement.
A last thought is that perhaps one of the best features of these products could well be for children’s education. If you start one when they are born and put the full R2 500 in every month you would have put in the R500 000 just as they hit 17, just in time for university fees.
So, overa l l there are s o me limitations, but really I think it is a great product that really will help grow ones investments over the long term by simply not having to pay any tax.
A YEAR (EQUATES TO R2 500 A MONTH) WITH A LIFETIME CONTRIBUTION OF