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Author Topic: What to do with some extra cash?  (Read 13444 times)

Pluto

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What to do with some extra cash?
« on: October 28, 2015, 02:51:24 pm »
Hey,

Can you guys give me some ideas/your opinion of what to do with a bit of extra cash?

I'll be getting a bonus soon of about R450,000, less 40% (41% or 42% now I think) will leave me with just over R250,000.
Planning on spending about R50,000 which will leave me with R200,000.

I've got 2 small bonds and paying prime less 1.45% on each which would be the safe option but I'm willing to accept some risk with this so i'd prefer not just sticking it into the bonds.
I also make monthly contributions to some unit trusts too but as i've learnt on here they are not always the best option, I've also invested a bit in a few random shares (APN,CFR,GPL,MTA and NPN, Not the best choices i've made but at least I got out of GLN before things went really bad    :) )

So from what I've learnt from you guys i'm leaning towards 2 options:

  • Getting into an ETF or 2.
  • Or putting it into an RA, if my understanding of the tax benefits is correct.
    If I were to place it into a RA would I be able to claim my tax back and in effect get  (200,000/60*100)-200,000=R133,333 tax back?
    Obviously I pay the tax once i retire but getting an extra R133,333 now seems like a pretty good idea? Or not?

Thanks for your input.
« Last Edit: October 28, 2015, 02:55:06 pm by Pluto »
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JDP

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Re: What to do with some extra cash?
« Reply #1 on: October 28, 2015, 03:24:16 pm »
First, have you open your TFSA (Tax Free Savings Account), with the 30K limit?
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Pluto

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Re: What to do with some extra cash?
« Reply #2 on: October 28, 2015, 03:33:24 pm »
That is on my list of stuff to do. So by the end of the year that will be a yes.
I've heard how they may change it soon to allow lump sum deposits.

Even if they did allow lump sum deposits, would you recommend that over an RA?
The immediate tax benefit you get out of an RA for me seems to be more appealing.
If my calculations are correct I could end up with R200,000 in an RA and R133,333 received from tax refund in a TFSA
vs
Just R200,000 in a TFSA.

Sorry, never mentioned below but i'm 35 so I've still got a bit of time on my side too ... hopefully :)
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Patrick

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Re: What to do with some extra cash?
« Reply #3 on: October 28, 2015, 03:36:15 pm »
Quote from: JDP on October 28, 2015, 03:24:16 pm
First, have you open your TFSA (Tax Free Savings Account), with the 30K limit?

Yes that, and one for your wife and one for each of your four children, the last R20k can go to the bond ;)
« Last Edit: October 28, 2015, 03:39:34 pm by Patrick »
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JDP

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Re: What to do with some extra cash?
« Reply #4 on: October 28, 2015, 05:50:23 pm »
As Patrick said. But to me its not a case of the one or the other, i have both, as well as equities and etf's, nut that just me. :D
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tmsf12

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Re: What to do with some extra cash?
« Reply #5 on: October 29, 2015, 09:08:49 am »
The maximum amount that you can contribute to your pension/provident/RA (in total) is 15% of your gross income.
15% of R450 000 = R67 500

You also said:
Quote
Just R200,000 in a TFSA.

Your annual limit for a TFSA is R30k.  You will be taxed (40%) for going over that limit.
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Mr_Dividend

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Re: What to do with some extra cash?
« Reply #6 on: October 29, 2015, 09:14:58 am »
Quote from: tmsf12 on October 29, 2015, 09:08:49 am
The maximum amount that you can contribute to your pension/provident/RA (in total) is 15% of your gross income.
15% of R450 000 = R67 500

You also said:
Quote
Just R200,000 in a TFSA.

Your annual limit for a TFSA is R30k.  You will be taxed (40%) for going over that limit.

True - but that is just his bonus not his total salary.
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Patrick

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Re: What to do with some extra cash?
« Reply #7 on: October 29, 2015, 10:18:31 am »
Quote from: tmsf12 on October 29, 2015, 09:08:49 am
The maximum amount that you can contribute to your pension/provident/RA (in total) is 15% of your gross income.
15% of R450 000 = R67 500

You also said:
Quote
Just R200,000 in a TFSA.

Your annual limit for a TFSA is R30k.  You will be taxed (40%) for going over that limit.
R30k per person, so wife and kids help. I'd also put 15% into a good RA. I quite like sygnia.
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tmsf12

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Re: What to do with some extra cash?
« Reply #8 on: October 29, 2015, 10:38:02 am »
Quote from: Patrick on October 29, 2015, 10:18:31 am
R30k per person, so wife and kids help

I didn't see the OP mention a family.  Does this count as insider trading?   :))
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Patrick

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Re: What to do with some extra cash?
« Reply #9 on: October 29, 2015, 11:28:55 am »
Quote from: tmsf12 on October 29, 2015, 10:38:02 am
Quote from: Patrick on October 29, 2015, 10:18:31 am
R30k per person, so wife and kids help

I didn't see the OP mention a family.  Does this count as insider trading?   :))
:D No, I don't actually know him, so it was a guess!

I think the goal is to not pay tax, so max the RA first, then do the TFSA. Erwintwr did a big fancy calculator that worked out which was most effecient depending on your tax bracket, but if the OP is in the top bracket it's almost certainly going to be wise to max the RA then do a TFSA. The rest I'd put into the bond for a guaranteed return.

Here's the calculator thread: http://shareforum.co.za/shares/tfsa-vs-ra-vs-satrix-calculator/
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tmsf12

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Re: What to do with some extra cash?
« Reply #10 on: October 29, 2015, 11:50:51 am »
If it was my money, I would do (and have done) what Patrick recommended above.  Living debt-free is 8)
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Pluto

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Re: What to do with some extra cash?
« Reply #11 on: October 29, 2015, 05:22:11 pm »
Nice guess Patrick, so close ... 0 kids and 0 wives :D ... girlfriend for just over 2 years now so she might make me marry her sometime though  :'(

I definitely won't put more than R30,000 into my TFSA and pay tax on it.

So the plan is:

Max out my RA (15% of gross salary).
Max out my TFSA (R30,000).

Leaning a bit towards an ETF with the rest over my bond though. I understand the bond would be safer but not in the mood for safe at the moment.


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