Question:
I am changing jobs and moving from the public to the private sector. The human resource department says I have about R300 000 to transfer to another retirement fund or about R205 000 if I cash it in.

Will I have to pay tax on the R205 000 or has it already been done? Should I take the R205 000 and put it into the money market?

Answer:
You should not cash in the money, but rather reinvest it into a preservation plan. If you take the cash the tax will have already been taken off.

One of the biggest mistakes people make is to cash in a retirement pay out and thereby putting themselves back many years. Many individuals spend the remainder of the money and it is impossible to make that money up again. The R300 000 could represent seven years of retirement savings.

Go and see a financial planner who can reinvest the money for you. The money market is not a suitable vehicle for retirement savings. In addition, it is simply too easy to tap into these funds.

Rather put it into an investment that is protected from the temptations of life.