Long-term wealth blending a TFSA, a retirement annuity, and discretionary investments, after tax.
Net wealth after tax
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TFSA
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RA (after drawdown tax)
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Discretionary
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Three accounts, three different tax bills
Serious savers usually spread money across more than one kind of account, and each is taxed in its own way. This tool projects the three that matter most over a long horizon: a tax-free savings account, a retirement annuity, and a plain discretionary investment such as a unit trust or an exchange-traded fund. It reports net wealth after tax, so the comparison is honest rather than three gross balances that hide very different tax outcomes.
The same monthly rand behaves differently depending on where it lands. A TFSA grows and pays out free of tax. A retirement annuity earns an income-tax deduction now and compounds untaxed, but is taxed when you draw an income later. A discretionary account gives no deduction and pays dividends tax along the way plus capital gains tax on sale. The tool layers all three to a single after-tax finish line.
How each pot is grown and then taxed
The TFSA is the simplest. The model grows your monthly amount at your chosen return, capping the yearly contribution at the annual limit this calculator uses, R36,000, and stopping once cumulative contributions reach the lifetime limit of R500,000. Confirm both with SARS, the South African Revenue Service, since the lifetime ceiling has shifted over the years. No tax is taken off TFSA growth at any point.
The retirement annuity compounds untaxed inside the fund, and the tool shows the yearly deduction you can claim, namely the contribution limited to 27.5 percent of income up to an annual cap of R350,000. To keep the comparison fair it then applies an indicative effective rate of 18 percent to the projected value, standing in for income tax on drawdown. Your real rate depends on your total retirement income, age rebates, and any lump sum, so treat 18 percent as a placeholder and check the live brackets with SARS.
The discretionary account carries two taxes. The tool applies dividends tax of 20 percent to an assumed 3 percent yield on the average balance each year. On sale, capital gains tax applies: it subtracts the R40,000 annual exclusion from the gain, includes 40 percent of the rest in taxable income, and taxes that portion at your marginal rate. South Africa has no separate CGT rate; a slice of the gain simply joins your income. Each rate here is the figure this calculator applies rather than a certified current number, so verify before relying on it.
A ten-year run across all three
Picture someone putting away R3,000 a month into a TFSA, R4,000 into a retirement annuity, and R3,000 into a discretionary fund, for 10 years, at a 10 percent annual return, on a 36 percent marginal rate and R600,000 of income. Using the rates this calculator applies, here is how the three pots finish.
| Step | Amount |
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The RA also threw off a yearly deduction of R48,000 here, real cash back each tax year that the net figure above does not even count. The chart shows what each account contributes to the R1.88 million total once tax is settled.
Notice how close the bars sit even though the TFSA paid no tax. The RA wins on raw size because the deduction lets you invest pre-tax money, though drawdown tax claws some back. The discretionary pot starts smallest and is nibbled by dividends tax yearly, yet stays competitive, and you can touch it any time. That liquidity shows up in none of these numbers but matters in real life.
Who this is for, and where it stops short
This is a planning tool for deciding how to split a fixed monthly surplus, not a substitute for a tax return or advice. It earns its keep when you already fund one account and wonder whether the next rand should start a second. A practical tip: TFSA annual room does not roll over, so a year you skip is gone for good, which argues for filling it early. A common mistake is overpaying past R36,000 in a year or R500,000 over a lifetime, which triggers a 40 percent penalty on the excess, as modelled by the limits here. Confirm those thresholds with SARS before topping up near the cap.
The limitations are worth stating plainly: the model uses one flat return for every account, assumes you never withdraw early, and treats discretionary dividends as a steady 3 percent yield rather than lumpy reality. It also sets aside the two-pot retirement system, under which a third of new RA contributions land in an accessible savings pot. None of that breaks the comparison, but the output is a clean estimate, not a forecast.
Common questions
Does the calculator account for inflation?
No. Every figure is in nominal rand, so a R1.88 million projection is in future money, not today's buying power. If you want a rough real value, lower your return assumption by your expected inflation, for example entering 7 percent instead of 10 percent, and read the result as roughly inflation-adjusted.
Why is the RA shown after a flat 18 percent tax when my marginal rate is higher?
Because retirement income is usually taxed more gently than your peak earning years. You stop contributing, you may have age rebates, and you control how much you draw each year, so your effective rate in retirement is often well below your current marginal rate. The tool uses 18 percent as a reasonable middle estimate, but your real figure depends on your total retirement income and the brackets SARS has in force then.
Should I really hold all three accounts at once?
Often yes, because they solve different problems: the RA gives a deduction and preservation, the TFSA gives tax-free growth, and the discretionary pot gives money you can reach before retirement. A frequent sequence is to claim enough RA to capture the deduction your bracket warrants, fill the TFSA, then route the rest to discretionary.