The Interest Income Tax exemption for those under the age of 65 is R23 800. That is equivalent to R1 983.33 monthly
The senior citizen social (SASSA) grant paid to pensioners = R1 980.
What would you do with a SASSA FUND, an additional tax-free income of R1 980 per month?
If you were to invest in South African retail government bonds, at the current rate of 11.25%, you would need a capital amount of R211 200 to generate the SASSA-level interest income of R1980.
A capital amount of R211 520 generates R1 983 monthly interest payments, which lands you just under the interest income exemption.
According to the latest Bankserv reports, the average take home income is of R14 340. An additional income of R1 980 would boost that income by 13.8%.
With an additional R1 980, you can cover your household expenses, invest, save yourself from irregular expenses that usually result in you taking out a loan, or using your overdraft and credit card facilities. Even that new iPhone monthly instalment doesn’t look so bad if it were paid with a SASSA income, not that I would ever recommend it.
My ideal usage of the SASSA FUND is to avoid using it for expenses, as this would have an impact on your other ratio and reserve requirements like the emergency fund. This is just to show you that the possibilities of “up to 5 year guarantee of passive income” are endless.
If you were to unexpectedly lose your job and your income dropped to R0, that R1 980 per month would come in handy to tie you over until you get back onto your feet.
If you were to avoid contributing to other investments from your take-home pay, you would still be able to grow your investments by R1 980 per month. Be it in a retirement, tax free or discretionary investment vehicles. Think about it. How many South Africans can invest R1 980 per month? It is a privileged position to be in. Privilege is for sale.
An annual Tax-free Saving Account (TFSA) contribution is R36 000, an equivalent monthly contribution of R3 000. Imagine if 66% of your monthly TFSA contribution were to come from the interest income generated by the retail government bonds investment. How cool would that be?
I would like to challenge you to start working towards having a SASSA fund. R211 200 may seem daunting but break it down into small goals and it can be achieved over time. Reinvest all interest proceeds until you have reached the target capital. Then you reap the benefits!
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