Cashing in on retirement

Jane asks: My dad is being made to go on pension from his company as he has reached the age of 65, after working there for three years. What should he do with his R150 000 provident fund? Should he withdraw it or leave it? What are the tax implications?

He has no debt and both house and car are paid off. His pension from Zimbabwe does not amount to much.
He has to continue to work and has another job lined up.

Maya replies:
As he is effectively retiring from his company he would be able to withdraw the full R150 000 tax free as you are able to withdraw R300 000 tax free on retirement as long as you have not made previous withdrawals. Any previous withdrawals could affect his tax-free benefit, however.

Financial adviser Gregg Sneddon says that if he does not need the money for income he should invest it as follows:

  • Keep a small percentage (R20 000) in a money market fund for emergencies.

  • Invest the rest into an inflation plus fund, for example the Coronation Capital Plus, Prudential Inflation Plus or Nedgroup Stable Fund.
These funds should give him some growth irrespective of markets over the next few years.

Although your father is in the position where he has to work financially, remember 65 today is still fairly young and it is important to keep active and still work to some degree. Hopefully he can find a position that is not stressful but which keeps him active and pays the bills.

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