R500 000.

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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.


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