Following the comments made by Minister Tito Mboweni with regards to accessing a portion of their retirement funds, we look at the personal finance aspect by asking: Is it a good idea to withdraw money from your pension when you’re still working. What are the risks of doing this? How can/ should the money be managed should it be accessed? Should people be stopped from accessing their pension – is it just a bad idea? Eunice Sibiya – Independent Financial Educator and Coach.
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Saving for retirement is one of the most important financial decisions you’ll make in your life. One of the benefits of saving for retirement, whether through a pension fund, a 401(k) plan, or an individual retirement account, is the availability of money when you retire. But, what if you need to access that money before retirement? In this article, we’ll review the pros and cons of withdrawing money from your pension fund.
Pros:
1. Emergency expenses: Life is unpredictable, and unexpected expenses can occur at any time. If you need money for an emergency such as a medical emergency, you can withdraw money from your pension fund.
2. Debt repayment: If you want to pay off your debt, withdrawing money from your pension fund can be a good idea.
3. Investment opportunities: You can use the money to invest in real estate, stocks, or other financial instruments, which can help you achieve your financial goals.
Cons:
1. Tax implications: Withdrawing money from your pension fund before retirement comes with tax implications. You will have to pay taxes on the money you withdraw. Additionally, you’ll pay a 10% penalty for withdrawing money before reaching retirement age.
2. Reduced retirement income: If you withdraw money from your pension fund, you will have less money saved for retirement. This can result in a lower income when you retire.
3. Lost compound interest: When you withdraw money from your pension fund, you lose out on compound interest. Compound interest is when your money earns interest on the interest earned, which can significantly grow your savings.
4. Possible early withdrawal penalties: Most pension funds impose early withdrawal penalties, which can be costly.
In conclusion, withdrawing money from your pension fund should be a last resort. It’s important to carefully consider the pros and cons of withdrawing money, and weigh the immediate financial needs against the potential long-term impact on your retirement savings. If you feel that you have no other option but to withdraw money from your pension fund, it’s advisable to speak to a financial advisor before making any decisions to understand the implications and decide what’s best for your financial future.
South Africans are not "financially prudent or disciplined" in principle. For we in general do not have emergency funds set aside for this rainy day.
We must understand the great benefit of the Government as South Africans withdraw their pensions and send that monies into the market. Tax and Vat is generated. So maybe we should stop wondering why this is actually being offered.
For those going emigrating in the future maybe it is a great idea to dip in now. See https://www.youtube.com/watch?v=4CQX_hj64Ng&t=5s
I am in such a bad sutuation it would help alot the first thing i will buy is a small car its not lekke with no transport
I smell a RAT. or even worse a snoek fish.. ANC government is bunch of scamS.. I forsee millions of transactions government charges for pensions withdrawal(doesnt exist even sound hallarious but with ANC its possible – its new policy on pipeline) done to all dos hu want dey r pension.
Even we( security officers) can we claim our provitend fund?
Life is too short, many won't reach retirement years. It's a brilliant idea to access a portion of yr pension funds.
From the look of things, It can't be overemphasized that, Cash is thrash! 3 BEST and surprisingly easy ways to double/hold your funds in 2021; Crypto, Real Estates, who can guess the 3rd?
it was supposed to be half of the money.
If you dont take your pension as sure as schitt the anc government will steal it
Take your pension money before the anc takes it…….
Yes we want to take our money. They will steal it anyway.
its our money for God's sake, it doesnt matter what we do with it
How much i hate government. I now forgive u. Should you approve this.lol
How many millionaires do you know who have become wealthy by investing in savings account? No one
Please do another interview when you know when the process will start, what is the lowest and highest percent one can draw at what percentage. Will there be difference btw withdrawing a retirement annuity and pension fund, etc.
It's critical to withdraw pensions, government can't loot it that way.
How many of us will reach 60 since life expectancy has dropped to 45. We suffer while we have money that can relieve us from debts most employees are under debt reviews and blacklisted pay off atleast our debts and relieve us
My retirementfund doesnt even show an increase. Rates are super bad. Country left to ruins. #gatvol
ASIYIDLENI LEMALI SOSEBENZENYE FUTHI.. ngaze bayi loote nayo laba abakhonjwa ngekhanda…..ngoba bayibheke ngelibovu iso kumanje… kwazibani nje aphumaphi lama billion (500) adliwa bume.
Who say we will even live up to retirement…Covid showed us flames..if i get a chance i will take a portion of it..if im one of the workers…Pay your debts and the bonds.
Please Mr Mbeweni, please do pass a bill for employees to access a percentage of our pension. Things are very difficult presently.
I'm afraid I smell a rat here, under the current government I'm even more sceptical.. ..anyway goodluck to you who welcom's this idea
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