Connect with us

Personal Finance

The Budget and Retirement Savings

The recent budget has had quite an effect on retirement planning. Are you aware of the changes and how they affect you?

Bryan Hirsch

Published

on

032

At the beginning of this year there was an outcry when Bishop Tutu suggested there should be a wealth tax for whites only. But, from my perspective, this budget has proved tantamount to a wealth tax for all.

I fully understand that Pravin Gordhan had to make some difficult calls. He needs to protect our country and ensure he keeps the budget deficit as low as possible. He also had to satisfy a broad range of competing exigencies. So on this I’m giving him a gold star.

My clients expect me to advise them appropriately, based on their individual needs and investment portfolios so, here, macro issues play no part. It’s also a fallacy that the high income earners in this country have a great deal of disposable cash as they shoulder the burden of most of the country’s taxes. This doesn’t come cheaply and it’s not hard to understand why many big earners have very little money left.

Reality check

I believe that the cornerstone of a prosperous country, apart from its citizens being economically active during their working lives, is that they save for their golden years and don’t become a burden on the State.

Let’s examine what has been implemented and what will impact on savings.

  • Capital gains tax was introduced on 1 October 2001 remaining unchanged until now. Currently, with the increase for individuals from 25% up to 33,3%, the marginal tax rate has increased from 10% of the gain to 13,3%. Companies now pay 18,6% and trusts 26,7%. This will affect retirement savings outside formal retirement plans because the gains will be taxed at higher levels.
  • Local dividends will be taxed at 15% (not 10%). This increase places investors in a totally different position from prior to its introduction as, initially, it was thought that the increase would be neutral. Investors’ dividend income will now be reduced by 5% and, again, this will have a negative effect on retirement savings. There is also no guarantee that companies will pass on the previous STC as a dividend.
  • On the positive side for all investors with funds offshore, foreign dividends will now be taxed at 15%. Previously offshore dividends were taxed at your marginal rate.

Additional changes

I was surprised that for the first time in many years, there was no increase in the interest abatement tax which still stands at R22 800 for under 65s and R33 000 for over 65s. Surely an inflation adjustment should have been granted.

Changes in medical deductions to tax credits for those under 65 will wipe out minor increases in tax savings at higher earnings levels. For this reason, there isn’t going to be much more available from tax savings to invest for retirement and, even the slight savings you may make, will be absorbed by the increase in petrol prices and tolls. Unfortunately, if the changes to medical aids for those over 65 are implemented, people in retirement will need to have yet more money saved to pay for some of their medical expenses, which may not be tax deductible. We will receive more information about this in the 2013 budget.

There’s one other big positive in the budget relating to formal retirement plans, including retirement annuities. Prior to the budget, the advantages of a retirement annuity were as follows:

  • Tax deductibility on contributions up to 15% of taxable income
  • Retirement annuities don’t form part of your estate
  • No capital gains tax — paid by the fund
  • No tax paid on interest earned
  • No fixed retirement date.

Following the budget, dividends received by retirement annuities will not be taxed and, although outside retirement annuities CGT has gone up, it has no impact on the retirement fund.

On a final note, I am greatly concerned that SARS appears to have opened the door to increase various taxes in the coming years, and this could impact on future savings for retirement.

BRYAN HIRSCH has been in the financial services industry for 47 years and is a director of Bryan Hirsch Colley & Associates. He has written two books, the first Bryan Hirsch’s Guide to Personal Finance and more recently, Steps to Financial Freedom. Bryan has written for many of South Africa’s top financial and business publications, has been a weekly guest on Radio SAFM for 18 years, and has his own weekly TV show You & Your Money on Summit TV.

Advertisement
Comments

Personal Finance

The 3 Decisions That Will Change Your Financial Life

There’s nothing worse than a rich person who’s chronically angry or unhappy. There’s really no excuse for it, yet I see it every day. It results from an extremely unbalanced life, one with too much expectation and not enough appreciation for what’s there.

Tony Robbins

Published

on

tony-robbins

Without gratitude and appreciation for what you already have, you’ll never know true fulfilment. But how do you cultivate balance in life? What’s the point of achievement if your life has no balance?

For nearly four decades, I’ve had the privilege of coaching people from every walk of life, including some of the most powerful men and women on the planet. I’ve worked with presidents of the United States as well as owners of small businesses.

Across the board, I’ve found that virtually every moment people make three key decisions that dictate the quality of their lives. If you make these decisions unconsciously, you’ll end up like the majority of people who tend to be out of shape physically, exhausted emotionally and often financially stressed. But if you make these decisions consciously, you can literally change the course of your life today.

Decision 1: Carefully choose what to focus on

At every moment, millions of things compete for your attention. You can focus on things that are happening right here and now or on what you want to create in the future. Or you can focus on the past.

Where focus goes, energy flows. What you focus on and your pattern for doing so shapes your entire life.

Related: 10 YouTube Channels Every Entrepreneur Should Follow

Which area do you tend to focus on more: What you have or what’s missing from your life?

I’m sure you think about both sides of this coin. But if you examine your habitual thoughts, what do you tend to spend most of your time dwelling on?

Rather than focusing on what you don’t have and begrudging those who are better off than you financially, perhaps you should acknowledge that you have much to be grateful for and some of it has nothing to do with money. You can be grateful for your health, family, friends, opportunities and mind.

Developing a habit of appreciating what you have can create a new level of emotional wellbeing and wealth. But the real question is, do you take time to feel deeply grateful for your mind, body, heart and soul? That’s where the joy, happiness and fulfilment can be found.

Consider a second pattern of focus that affects the quality of your life: Do you tend to focus more on what you can control or what you can’t?

If you focus on what you can’t control, you’ll have more stress in life. You can influence many aspects of your life but you usually can’t control them.

When you adopt this pattern of focus, your brain has to make another decision: 

Decision 2: Figure out, What does this all mean?

Ultimately, how you feel about your life has nothing to do with the events in it or with your financial condition or what has (or hasn’t) happened to you. The quality of your life is controlled by the meaning you give these things.

Most of the time you may be unaware of the effect of your unconscious mind in assigning meaning to life’s events.

When something happens that disrupts your life (a car accident, a health issue, a job loss), do you tend to think that this is the end or the beginning?

If someone confronts you, is that person insulting you, coaching you or truly caring for you?

Does a devastating problem mean that God is punishing you or challenging you? Or is it possible that this problem is a gift from God?

Your life takes on whatever meaning you give it. With each meaning comes a unique feeling or emotion and the quality of your life involves where you live emotionally.

I always ask during my seminars, “How many of you know someone who is on antidepressants and still depressed?” Typically 85% to 90% of those assembled raise their hands.

How is this possible? The drugs should make people feel better. It’s true that antidepressants do come with labels warning that suicidal thoughts are a possible side-effect.

But no matter how much a person drugs himself, if he constantly focuses on what he can’t control in life and what’s missing, he won’t find it hard to despair. If he adds to that a meaning like ‘life is not worth living,’ that’s an emotional cocktail that no antidepressant can consistently overcome.

Yet if that same person can arrive at a new meaning, a reason to live or a belief that all this was meant to be, then he will be stronger than anything that ever happened to him.

When people shift their habitual focus and meanings, there’s no limit to what life can become. A change of focus and a shift in meaning can literally alter someone’s biochemistry in minutes.

So take control and always remember: Meaning equals emotion and emotion equals life. Choose consciously and wisely. Find an empowering meaning in any event, and wealth in its deepest sense will be yours today.

Once you create a meaning in your mind, it creates an emotion, and that emotion leads to a state for making your third decision:

Related: 13 Habits Of Self-Made Millionaires You Could Adopt Today

Decision 3: What will you do?

The actions you take are powerfully shaped by the emotional state you’re in. If you’re angry, you’re going to behave quite differently than if you’re feeling playful or outrageous.

If you want to shape your actions, the fastest way is to change what you focus on and shift the meaning to be something more empowering.

Two people who are angry will behave differently. Some pull back. Others push through.

Some individuals express anger quietly. Others do so loudly or violently. Yet others suppress it only to look for a passive-aggressive opportunity to regain the upper hand or even exact revenge.

Where do these patterns come from? People tend to model their behaviour on those they respect, enjoy and love.

The people who frustrated or angered you? You often reject their approaches.

Yet far too often you may find yourself falling back into patterns you witnessed over and over again in your youth and were displeased by. It’s very useful for you to become aware of your patterns when you are frustrated, angry or sad, or feel lonely. You can’t change your patterns if you’re not aware of them.

Now that you’re aware of the power of these three decisions, start looking for role models who are experiencing what you want out of life. I promise you that those who have passionate relationships have a totally different focus and arrive at totally different meanings for the challenges in relationships than people who are constantly bickering or fighting.

It’s not rocket science. If you become aware of the differences in how people approach these three decisions, you’ll have a pathway to help you create a permanent positive change in any area of life.

Continue Reading

Personal Finance

7 Steps To Achieve Financial Freedom

Achieving financial freedom doesn’t necessarily mean becoming filthy rich – not that that hurts.

Brian Tracy

Published

on

brian-tracy

In this video, Entrepreneur Network partner Brian Tracy explains the seven steps you need to take to achieve financial freedom. Now, financial freedom doesn’t mean becoming filthy rich – lottery winners go bankrupt all the time. Instead, financial freedom is about becoming disciplined and using your money in a way that ensures you can live the sort of life you want both now and in the future.

Related: 5 Qualities Of Successful Entrepreneurs

That’s why the first step isn’t about getting a lot of money. Instead, it’s about teaching yourself to think positively about money. That way, you’ll be in the right mindset to move forward.

Click play to learn more.

This article was originally posted here on Entrepreneur.com.

Continue Reading

Personal Finance

4 Ways To Become A Millionaire Even When You Start With Little

It costs nothing to take advantage of the limitless opportunities online.

Timothy Sykes

Published

on

102-4-ways-to-become-a-millionaire-even-when-you-start-with-little

The hardest part of becoming successful is getting started to begin with. But despite the challenges ahead of you, there’s a way to become a millionaire when starting with little. I’m going to show you four reasons why you can become a millionaire with just a small investment.

1First focus on learning, not big gain

Education is your greatest weapon. Focus on learning in the beginning. Don’t make the mistake of focusing on making huge gains in the beginning. Learn everything you can because this is how you build the foundations for long-term gains.

They say that if a millionaire goes bankrupt they’ll nearly always be able to get it back. And that’s because they might have lost their money, but they have the knowledge of how to get back to where they need to be.

Related: 21 Choices Millionaires Make That You Aren’t Making But Should Be

2You can learn loads about any topic online

online-learning

I’m grateful for the internet. It’s the single biggest library in the world. You’re reading this article right now and you’re acquiring knowledge you wouldn’t have been able to acquire 40 years ago. Use the internet to its fullest extent, whether that’s through reading books, browsing articles or watching video tutorials.

Set some time aside every day to learn something online. It could be a video series or a favorite blog. When you get into the habit of learning regularly you’ll find that you advance much faster.

3Focus on the niche you love

These days you can learn about anything and target the niche you’re passionate about. This is what I was able to do with penny stocks. I found a gap in the market and provided knowledge to people who wouldn’t have otherwise being able to access this sort of information.

You can do that with absolutely any niche. When you find a niche you’re passionate about and you use the reach of the Internet you start to make huge gains.

4Prove your expertise by creating free content

Your reputation as an authority is the new business card. There’s a reason I created a penny stock guide and made it free for all. You may have already seen ads for it on social media. The way to succeed with little is to create a reputation through your content.

It’s the gateway to success because through free content you start to build relationships with others who value your work. And from there everyone gets richer.

Related: How To Become A Millionaire, Explained In 1 Minute

You can do lots with a little

The days when you needed a huge investment to become successful are long gone. These days you can do so much with just a little. Find what you love, advance your knowledge in that area, and create a product that fulfills a need. Finally, work on building up relationships through portraying yourself as an authority on your subject.

Combine everything together and you can accomplish anything.

This article was originally posted here on Entrepreneur.com.

Continue Reading

Trending

FREE E-BOOK: How to Build an Entrepreneurial Mindset

Sign up now for Entrepreneur's Daily Newsletters to Download​​