Countries and big investors run for gold during uncertain times and volatile geopolitics, but where does the ordinary consumer go?
There is no question that we live in uncertain times. And we know that uncertain times affect our investments. Fortunately, there is an answer: you can use Tax-Free Savings Accounts and Retirement Annuities to help you build wealth in times like these.
While uncertainty is part of every economic cycle, events like the 2008 financial crisis or the Covid-19 market crash can easily shake investor confidence, Thomas Berry, head of sales at PSG Wealth, says.
“However, history shows us that consumers who stay invested are often in the best position to recover and compound their wealth over time.”
He explains that it is not because any product is immune to volatility, but because disciplined savings help investors stay the course. Vehicles such as Tax-Free Savings Accounts (TFSAs) and Retirement Annuities (RAs) are particularly useful given that they offer tax-efficient savings strategies.
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Beware of emotion-driven investment decisions in uncertain times
Berry points out that one of the greatest threats to long-term savings is emotion-driven decision-making.
“In an RA, the larger portion of your investment is inaccessible until age 55, which helps remove the temptation to draw out during downturns.
“With TFSAs, the annual contribution limit of R36 000 per year supports gradual, committed investing rather than lump-sum reactions. By staying invested through volatility, investors benefit from market rebounds, compound growth and rand-cost averaging, which can significantly improve performance over time.
“In times of uncertainty, when returns may fluctuate, tax efficiency is one of the key differentiators. This is particularly pertinent if growth is lagging because of market pressure or inflation, as not losing part of that return to tax can meaningfully improve long-term outcomes.”
Berry says with no tax on growth, interest, or dividends, TFSAs and RAs keep more of your capital compounding, ensuring that your returns stay invested, helping your portfolio compound faster when markets recover.
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Additional tax deduction on RAs boost long-term savings in uncertain times
“With RAs, the additional tax deduction on contributions can provide immediate relief to higher earners, effectively boosting the amount committed to long-term savings even during leaner times.”
Balancing flexibility with long-term protection is a good idea.
“The idea of locking away your money can be daunting when the future feels uncertain. Each of the two tax-efficient saving vehicles offers a different balance between flexibility and security, depending on your goals and circumstances.
“A TFSA allows withdrawals at any time without tax penalties. However, withdrawals count toward lifetime contribution limits, which can limit long-term compounding potential.
“An RA, on the other hand, provides structured long-term protection. Funds are locked in until retirement (except for the savings component in case of emergencies), reinforcing commitment and aligning with goals like income security in later life.”
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Learn from past uncertain times to build wealth
It pays to learn from the past, Berry says.
“While the future remains uncertain, we know that investors who remain committed to their savings strategies generally recover the strongest from previous periods of market volatility.
“The key lesson is that time in the market is extremely important when trying to achieve your investment goals. Products like RAs and TFSAs, which support discipline and tax efficiency, give investors a better chance of securing their financial future.”