· Updated · Built around the RA or TFSA calculator
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Both are tax breaks; they just arrive at different ends. A retirement annuity (RA) gives you back tax at your marginal rate when you put money in, and taxes what it pays out later. A tax-free savings account (TFSA) gives you nothing up front, and never taxes the growth or what you take out. Which one wins depends mostly on your tax rate now against your tax rate in retirement.
The two side by side
- RA: contributions are deductible up to 27.5% of your income, capped at {{racap}} a year - the RA tax back calculator shows your refund. (Why some pages still say R350 000 is in our PAYE post.)
- RA: locked until 55, apart from the two-pot savings pot (see withdrawing from your savings pot). At retirement at most a third comes out as cash - the first R550 000 of lifetime lump sums is tax-free (lump sum tax calculator) - and the rest buys an annuity taxed as income.
- TFSA: {{tfyr}} a year and {{tflife}} for life, no tax on interest, dividends or growth, and you can withdraw any time. Go over the limits and SARS takes 40% of the excess (tax-free savings calculator).
- TFSA money taken out cannot be put back without using up limit again.
Slide it: which side leaves you more?
The same amount goes into each every month. On the RA side, the tax SARS gives back each year is invested at the same growth. On the TFSA side, anything above the yearly or lifetime limit goes into an ordinary investment (tax on that growth is left out, which flatters the TFSA side slightly).
Reading the result
- Higher earners usually do better in the RA. At a 36% or 41% marginal rate the tax back is large, and most retirees pay a much lower average rate on their pension.
- On a low income the TFSA often wins - there is little tax to get back, and the TFSA is flexible.
- The "tax later" slider decides close calls. It is your guess of the average tax on what the RA pays out. Check it against the living annuity calculator, which shows the PAYE on a retirement income.
- Many people do both: the RA up to the deduction limit, then the TFSA up to {{tfyr}}.
The full comparison, live
How much the same money grows on its own: the compound interest calculator. What it adds up to by retirement: the retirement savings calculator.
Sources
- Retirement fund deduction 27.5% of the higher of remuneration or taxable income: Income Tax Act s11F. Cap raised from R350 000 to R430 000 from 1 March 2026 in Budget 2026; the R430 000 figure is from a secondary source (Moonstone, 14 May 2026) - see the note in our PAYE post.
- TFSA R46 000 a year from 1 March 2026, R500 000 lifetime, 40% on excess: SARS - Tax Free Investments.
- Retirement lump sum table (first R550 000 tax-free), unchanged for 2026/27: SARS - retirement lump sum benefits.
- Income tax brackets and rebates 2026/27 (for the tax back): SARS - rates of tax for individuals.
- Not verified from a primary source: the growth rate and the tax rate in retirement - both are slider assumptions.
Calculators used in this post
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