February is Tax Month: Are You Maximizing Your Savings?

By Zac Dermick & Justin Evans

We get it – in a world where instant gratification is at our finger tips – it’s often a seriously tough decision to put away extra money today, that you’ll only enjoy later in life. In this article, we will share with you how to maximise tax savings before the end of February 2025.

We remind our clients that this is the final opportunity to take full advantage of tax-efficient investment strategies. We work with individuals and businesses to ensure they’re making smart financial decisions—not just for today, but for the long term.

If you haven’t topped up your Tax-Free Savings Account (TFSA) or made the most of your Retirement Annuity (RA) contributions, you could be leaving valuable tax benefits on the table. (And there is some instant gratification at least in knowing that.)

Why Tax-Free & Retirement Savings Matter

Tax-Free Savings Account (TFSA)

One of the best ways to grow wealth in South Africa is through a TFSA. While contributions are made with after-tax income, all returns—whether from interest, dividends, or capital gains—are completely tax-free.

• The annual contribution limit is R36,000, with a lifetime cap of R500,000.
• Any unused annual allowance does not roll over, meaning if you don’t maximize it before 28 February, that tax-free opportunity is lost forever.

Retirement Annuity (RA) Contributions

For clients looking to reduce their taxable income while saving for the future, an RA is one of the most effective tools available.

• Contributions are tax-deductible, reducing taxable income and, ultimately, the amount of tax paid.
• You can contribute up to 27.5% of your taxable income (capped at R350,000 per year) and benefit from tax-free growth within the RA.
• Upon retirement, up to one-third of your savings can be taken as a lump sum (subject to tax), while the rest is used to provide a sustainable income.

The Cost of Waiting: Saving from Age 25 vs. 35

One of the biggest mistakes we see is people thinking they have “plenty of time” to start saving. The reality is that delaying just a few years can cost you millions (Yes! Millions) in potential growth.

Consider this: If you invest R1,000 per month into an RA, earning an average 9% annual return:

• Starting at 25: You could accumulate around R4.3 million by age 65.
• Starting at 35: Your total would be R1.7 million by age 65—less than half the amount.

That’s a difference of R2.6 million, just by starting only 10 years earlier. Simply put, time is your greatest asset when it comes to investing. The earlier you start, the more you benefit from long-term returns and compound growth.

You Have 4 More Days – What To Do Before 28 February?

As advisers, we encourage clients to take action before the tax year closes. Here’s what you should be doing now:

✔ Review your contributions – Have you maximized your TFSA or RA limits?
✔ Top up your RA – A lump sum contribution before 28 February can reduce your taxable income.
✔ Check your financial plan – If you’re not yet investing in a tax-efficient way, now is the time to start.

With just a few days left, now is the time to make sure you’re maximizing your savings. If you need guidance on how to structure your investments or optimize your tax benefits, let’s talk. We are here to help you make the most of every opportunity before the deadline!