By: Adv. Abigail Munsami, Head of Compliance, GrowthHouse
Making the most of your retirement savings with the new two-pot system
The new two-pot retirement system introduced under the Pension Funds Amendment Act gives you greater flexibility to manage your retirement savings and provides you with liquidity when you need it most. Now, you can access a portion of your retirement savings for emergencies or any immediate needs while keeping the rest invested for your future. This flexibility can be valuable, but it also means balancing today’s needs with tomorrow’s goals.
Things to consider before tapping into your savings
While the option to withdraw funds can provide temporary peace of mind, it is important to understand the impact this may have on your long-term financial wellbeing:
- Taxes and fees: Withdrawals are taxed at your marginal rate, and administrators often charge fees for processing a transaction. Most retirement administrators provide calculators to help you realise the full impact of a withdrawal, assisting you in making an informed decision
- Impact on retirement savings: Taking out funds today can reduce the compound interest your savings could earn over time. If a withdrawal is necessary, consider making additional contributions down the line to keep your retirement plan on track.
- Protecting your retirement: While the two-pot system offers access to funds, regular preservation of your retirement savings is still essential. Rolling over savings if you change jobs is an effective way to ensure steady progress toward retirement without compromising your long-term goals.
Although you now have more flexibility when it comes to your retirement savings, it is important to approach it with the utmost care and diligence. GrowthHouse is here to help you weigh your options, balancing immediate needs with your future goals. As your financial home, we remain committed to providing expert guidance that secures both your present and your future.
