Two-pot withdrawal: tax now, and the cost later

Since September 2024 you can take money from the savings pot of your retirement fund once a tax year. The cash is real. So is the tax, and so is the dent in what you retire on, and most people underestimate both.

A withdrawal has two costs. The tax is the obvious one: SARS adds the withdrawal to your income for the year and taxes it at your marginal rate, with no tax-free slice, so don't plan around one. Your fund deducts it before you see a cent. The second cost never appears on your fund's withdrawal screen, and it's usually the larger of the two: the growth that money would have produced by the time you retire. This calculator puts both numbers in front of you at once.

You'll need:

• the amount you're thinking of taking. The minimum allowed is R2,000
• your taxable income for the year, so the tax is worked out at your rate
• roughly how many years until you retire
• a growth rate for your retirement investments. Around 9% a year is a common long-run assumption for a balanced fund, though use your own view

Three figures carry the whole picture: the tax, the net cash you actually keep, and the future value forgone. The chart traces the gap between cash taken and growth lost widening year by year, so the trade has a shape instead of staying abstract. If you're tempted to make this an annual habit, the repeat setting shows what several withdrawals cost together, which is where the numbers get uncomfortable.

It uses the 2026/27 tables for someone under 65 and can't see your full tax year, so a withdrawal big enough to push you into a higher bracket is an estimate. It also assumes steady growth, which no real market delivers.

Consequences, not advice. The decision stays yours.

Money Cat is an information tool, not financial or tax advice. Confirm with your fund or a registered tax practitioner before you withdraw.