As a 55-year-old, would it still be advantageous for me to start a tax‑free savings account (TFSA)? If so, would it be better to invest in an actively managed TFSA like the Allan Gray Balanced Fund, or in a more passive, lower-cost option such as exchange-traded funds (ETFs) via EasyEquities?
That’s a great question. In short – yes, starting a TFSA at age 55 can still be highly beneficial.
With the current annual contribution limit of R46 000, it will take just under 11 years to reach the R500 000 lifetime cap, meaning you would be around 66 when the limit is reached.
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All growth inside a TFSA – including interest, dividends, and capital gains – is completely tax-free, making it an efficient long-term investment for supplementing retirement income or covering later-life expenses.
Given how few tax incentives are available to individuals, making use of this allowance is a smart and effective way to improve your after-tax returns.
Investment choice
Whether you choose an actively managed option like the Allan Gray Balanced Fund or a low-cost ETF-based TFSA through a platform like EasyEquities depends on your preferences, risk profile, and your views on active versus passive management.
Read: Everything you need to know about tax-free investments in SA
Over an 11-year period, both can be appropriate – the key is choosing a solution with transparent fees and an asset allocation that matches your needs.
Additional benefit to consider
If your TFSA is issued under a life licence, you are able to nominate a beneficiary. This means the proceeds can be paid directly to them on your death, bypassing your estate.
As a result, no executor fees (which can be up to 4%) are charged on that investment – a meaningful saving and an efficient way to transfer wealth.
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