The risks of withdrawing from your Two-pot retirement system

UNDER the new “two-pot” system, the cash in retirement-fund “savings pots” presents a real temptation to fund members, but withdrawing it should be resisted for a few very good reasons.

- JOHN MANYIKE

An “instant gratification” mind-set may be what you cherish the balance of the “savings pot” in your retirement fund. It’s important to keep that mindset in check because surrendering to it will cost you dearly, in several ways.

You may think: “Oh, I’ve got R20 000 I can withdraw. Why don’t I use it to buy a new lounge suite or treat myself to a weekend at a luxury spa?” However, if you were to choose to spend that money, the wise decision would be to leave it where it is.

First of all, you will not receive the full amount — a tax of between 18% and 45% will be deducted, depending on your income.