Question:
Telkom Retirement Fund (TRF) rules state that I can, with approval from Telkom, go on early retirement between 50 and 55. If, due to retrenchments, I am forced to go on early retirement at 51 I assume I can transfer my money from the TRF to a living annuity. If I can do this then will I immediately start getting a monthly income out of it or will my money lie in wait until I am 55 before I can draw a monthly income?
Answer:
Charles, There are two issues here. Firstly, Telkom may allow you to go on early retirement before 55, but will SARS? Our tax law permits early retirement due to ill health, we are not aware that it permits early retirement due to retrenchment, so you should get clarity on that from the fund (who should have previous experience with this - you won't be the first person retiring before 55, if this is indeed permitted on the basis of your fund rules). Secondly, if it is permitted, then you will be allowed (in fact compelled) to draw down annually from your living annuity from that point onward. You should however appreciate that 51 is still very young (your respondent is also 51) and the odds of making your money last, and maintain your standard of living for the next thirty or so years are very low. We would strongly recommend that you do everything you can to delay your retirement and drawing down from your savings for as long as possible.
