Resign, Invest, and Prosper: 5 Steps to Secure Your Financial Future

Resigning from government employment is a big decision. But imagine this: your hard-earned capital not only grows but also provides you with a steady income for years to come. Sounds amazing, doesn’t it? That’s exactly what Derick, Tammy, and Ilona achieved.

Derick, after watching the Resign Masterclass, reached out to me for guidance. Together, we mapped out a strategy that ensures his capital grows while he receives an income — without the risk of running out of money. One of Ilona’s powerful takeaways from our discussion was this simple yet profound principle:

“Eat the fruit, not the root.”

This blog shares the five crucial steps that helped Derick achieve financial freedom — and can help you too.

Step 1: Protect Your Capital – The Foundation of Wealth

When resigning, the way you handle your capital determines your financial success. Here’s a step-by-step outline:

1. Transfer Your Capital Wisely:
   • Move your pension fund capital into an approved fund.
   • Ensure it’s not just any approved fund but the perfect one, tailored to your needs.
2. Access a Portion of Your Funds:
   • You can withdraw up to one-third of your capital in cash, with the remaining two-thirds invested for income generation.

Minimizing Taxes on Withdrawals

Did you know you can legally reduce or eliminate taxes on your withdrawal? Here’s how:

• By carefully planning the withdrawal amount, Derick avoided paying any tax on his one-third portion.
• The two-thirds portion, when transferred directly to an investment fund, remained untaxed until it generated income.

This strategic approach saved Derick hundreds of thousands in taxes while ensuring his capital worked for him.

Step 2: Budgeting Smartly and Eliminating Debt

A secure financial future starts with a well-thought-out budget.

• Review Expenses: Identify unnecessary spending and reallocate funds to areas that grow your wealth.
• Optimize Policies: Cancel redundant or outdated policies.
• Settle Debt: Paying off debt reduces monthly obligations, allowing you to withdraw less income (and pay less tax!).

For example, Derick’s reduced expenses enabled him to draw a lower taxable income while maintaining his lifestyle.

Step 3: Strategic Investments – Grow While You Withdraw

The key to long-term financial security is investing wisely. Here’s the principle Derick followed:

• Preserve Capital: Protect the “root” (your principal capital) while withdrawing the “fruit” (returns).
• Customize Your Strategy: Every investment plan should align with your financial goals.
• Vet Funds Thoroughly: Evaluate potential funds upfront to ensure they are the right fit for your needs.

When structured properly, investments not only generate steady income but also grow your capital — giving you the best of both worlds.

Step 4: Minimize Fees and Charges

Fees can erode your returns. Here’s how Derick avoided this pitfall:

1. Choose the Right Fund: Selecting the wrong approved fund or investment house leads to unnecessary costs.
2. Plan Ahead: Avoid frequent changes to your investment structure, which can incur penalties.
3. Maximize Value: Ensure every rand spent on fees delivers tangible benefits, such as growing your capital or reducing taxes.

Step 5: Advanced Tax Planning – Keep More of Your Money

Taxes can eat away at your wealth if you’re not careful. Derick’s success was largely due to meticulous tax planning:

• Zero Tax on Transfers: By transferring his pension to an approved fund, Derick incurred no taxes.
• Pre-98 Tax-Free Benefit: Leveraging this benefit, he minimized taxes on his one-third withdrawal.
• Tax-Efficient Income: Adjusting his income withdrawals kept his tax liability at a minimum.

This approach allowed Derick to grow his capital while keeping more of his money in his pocket.

Bonus: Frequently Asked Questions (FAQs)

1. Can I really avoid taxes when resigning?
   Yes, with proper planning, you can minimize or eliminate taxes on your one-third withdrawal and investment transfers.
2. How do I choose the “perfect approved fund”?
   The ideal fund depends on your financial goals, risk tolerance, and income needs. A one-on-one consultation will ensure the right choice for your situation.
3. What happens if I make the wrong investment decision?
   Choosing the wrong fund or strategy can result in higher fees, penalties, and lost opportunities. Careful planning from the start prevents costly mistakes.

Your Next Step: Secure Your Financial Future

Derick’s story proves that resigning from government employment doesn’t have to be daunting. With the right guidance, you can protect your capital, grow your wealth, and minimize taxes — all while enjoying financial freedom.

Ready to take control of your finances? Click here to schedule your one-on-one consultation and let’s create a plan tailored to your needs.

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• Comment below with your thoughts or questions!
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Together, we can build a financially secure community.

Disclaimer: Retirement Wellness SA is an Authorised Financial Services Provider – FSP 31609. The information provided here is not offered by or on behalf of the Government Employees Pension Fund.