Preserve or Withdraw? What R500,000 Could Become by Retirement

The biggest cost of cashing out retirement money may not be today's tax. It can be the future growth you give up. The examples below are mathematical illustrations, not investment forecasts.

Illustration: preserve R500,000 for 20 years

If R500,000 earned an assumed 7% a year for 20 years, before allowing for fees, tax differences, inflation and variable returns, the mathematical future value would be about R1.93 million.

At 9%?

At an assumed 9% a year for 20 years, the mathematical future value would be about R2.80 million. Actual investment returns will vary and can be negative over some periods.

What if you withdraw the R500,000?

Using the 2027 ordinary withdrawal table and assuming no previous relevant lump sums, the simplified tax on a R500,000 ordinary withdrawal is R85,050, leaving about R414,950 before any other consequences. Your actual SARS directive can differ.

The decision is not simply 'cash or no cash'

You may have legitimate short-term needs after resignation or retrenchment. The useful question is how much liquidity you actually need and whether the rest can remain invested for retirement.

Use the interactive cash-out vs preserve calculator with your own age, fund value and assumptions.