“I am about to change company and will receive R157 000 between my pension and provident fund. After tax I should receive R130 000. I have bank loans along with my wife of about R70 000, and we also want to renovate our kitchen and bedroom. What do you suggest I do and can I invest some money in a high yielding investment ” asks Eldridge.

Maya replies: Please do not use your retirement funds to renovate the kitchen! You have no idea the value you will be destroying long term. Firstly you will be handing over R27 000 to the taxman. Considering that an investment in a high equity balanced fund should double every seven years, in twenty years’ time that tax bill would have cost you R216 000.

By transferring the funds to a preservation fund your R157 000 could be worth more than R1.2 million in twenty years’ time – that is a very expensive kitchen renovation!

It is also worth pointing out that based on the age and income you provided you should already have accumulated around R720 000 towards retirement – if these are your only retirement funds you are already falling well behind your required savings rate.

A preservation fund allows you to make one withdrawal before retirement so if you do find yourself in financial difficulty you still have a safety net. Allan Gray, Coronation, and 10X all have low-cost preservation options.

Rather preserve your money, create a financial plan to pay off your debt and start saving for that new kitchen.