Using your tax refund to bring home more refunds?

Using your tax refund to bring home more refunds?

Let’s be honest. It’s seldom with great excitement that we open a message from the taxman. But this time of the year that short note announcing a refund to investors who’ve topped up their retirement annuities in the previous tax year is most welcome. Which brings us to the question: what should you do with your refund?

Most likely some of it needs to go towards childrens’ school fees, your bond or some urgent home repairs, but we hope you also reward yourself for putting away extra money last year by enjoying some of it now. Investing in memories is important, as your older self will need both memorable moments to relive with friends and family – and enough money to retire with dignity.

To make sure you achieve the latter, we recommend that you use at least part of your tax refund for your long-term savings. In most cases a tax-free savings/investment account (TFSA) or retirement annuity (RA) is the tax-efficient choice, as you pay no tax on income or capital growth on your investment while it remains invested.

But which one – TFSA or RA – is a better fit for you?