Black Friday is for buying those sneakers, branded handbag or tablet you’ve been eyeing all year, I know. Marketing gurus will try to convince you that their discount is the biggest, and that their product offers the most value at the advertised price.
Am I being ridiculous to suggest a retirement annuity (RA) for your trolley?
We all love a bargain. It gives you a sense of achievement that you’re getting more for less, that somehow, for a change, life is fair. Just look at the discount – at that price, it’s a steal. Your purse will achieve so much more if you pay so much less for this thing that you really want.
There is however another want that we sometimes avoid – and that is peace of mind. The knowledge that you are being responsible and making provision for tomorrow.
The great news is that peace of mind can come at a greater discount than a new gym bag. The reason is that government pays you back for every penny you put into your retirement savings. The size of your discount depends on the tax rate you pay on your income. If you’re in the top bracket, you get R450 back for every R1 000 you invest, and even in the lowest bracket, you get R180 back.
Now isn’t that worth it to put an RA in your cart?
The greater news is that any savings is better than nothing – and the earlier you start, the less you will have to put away later. This is because time acts like baking powder or sourdough when you add it to the savings you’re baking. If you put it in the oven or the sun for long enough, it will grow to many times its size. The reason is so-called compound interest – when your saving grow and you earn growth on the growth, it becomes a kind of magic.
So, even if you don’t want to face a financial adviser right now, just start. A mere R500 a month can get you to make great strides if you start early enough. In the end your discount in the form of a tax rebate will take you much further than another pair of running shoes.
The pension discount is not like Black Friday or Cyber Monday restricted to one day a year either. For those who are already contributing to a pension fund or retirement annuity, there is the great opportunity that they can top up their savings with a once-off contribution at any time. They can even do this more than once during tax the year when they get a windfall. There is a restriction on how much you can add, but it kicks in only at a very high level. And even if you contribute “too much”, you don’t get penalised – it just rolls over to help you in future.
Come on. When you look back one day, will you thank yourself for a sweater you can’t remember or for the warm feeling that you took a great savings decision one Black Friday?