Your decision to withdraw or not to withdraw from your retirement savings will depend on your circumstances.
Your retirement fund savings should ideally be for your retirement and you should preserve as much of your savings as you can to ensure that when you retire it buys you a pension that replaces the bulk of your pre-retirement income.
In most employer-sponsored retirement funds, your retirement fund contributions are set up to enable you to buy a pension equal to a percentage of your final salary after contributing for between 30 and 40 years of your working life. This is known as your income replacement ratio and can be anything from 60% to 75% depending on your fund.
If you withdraw from your savings pot without replacing what you took, you will not achieve the pension target. Read more: How much do I need to save for retirement? Check if your retirement savings are on track: Retirement Savings Calculator
Many South Africans are already behind on their retirement savings because they have withdrawn savings when changing jobs, or only started saving late.
Industry statistics show that many people have so little saved that their income in retirement will be less than a third of what they earn when they retire.
You should not tap into your retirement savings just for things you want and do not necessarily need – it would be better to save up for these and/or pay for them from your current earnings.
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WITHDRAWING AND YOUR RETIREMENT PLAN |
Ideally, you should have emergency savings and 
insurance in addition to your retirement savings to cover you for emergencies. If you do not have these and an emergency arises, this may be a time when you will need to withdraw from your savings.
If you do withdraw from your savings, consider how you will replace what you take out and any growth you have lost while the money was out of your fund. You will pay tax on any withdrawals at your marginal tax rate, but when you replace what you withdrew, you may enjoy a tax deduction. Use the tax saving to top up your retirement fund.
If you have debt, you need to think carefully about whether withdrawing from your retirement fund is the best way to pay it off. It may make sense to save yourself the interest and then rebuild your retirement savings. It will not make sense if you just run up the debt again.
If the amount you can withdraw from your retirement savings will not be enough to help you extinguish the debt in the near future, it may not make sense to withdraw since you will pay the tax on the withdrawal and your debt will still be accumulating interest.
If you are unable to repay your vehicle or home loan, consider your options - will your bank or loan provider consider an alternative repayment plan or could you downscale?
Consider whether consolidating your debt may be a better option – helping to make your repayments more affordable without damaging your future retirement income.
If you are over-indebted, debt review or debt counselling may be a better option than raiding your retirement savings and still being unable to manage your debt. Under debt counselling you could get lower interest rates or longer repayment periods to enable you to manage your debt.
If you are thinking of withdrawing from your retirement savings for something you want or need, consider whether you could rather save up for what you need:
And use our Savings goal calculator
Also if you are considering using your retirement savings to finance a home, a car or to fund education, consider the alternatives and weigh up all the implications:
If, after considering all the options, you still decide to borrow from yourself by withdrawing from your retirement savings, make a plan to repay yourself so your retirement plan remains on track.
withdrawing can have on your retirement savings.