The timeless value of life annuities in retirement planning

Around the world, annuities are commonly used to fund retirement by providing a regular income, usually over a long period of time. Annuities are most often considered as financial solutions for people who are close to retirement, or are already retired. Annuities can come in a variety of shapes and sizes and are unfortunately often seen as complex products with heaps of rules and regulations.

But annuities are a great way to create an income stream in retirement.

Planning for retirement is crucial to ensure financial security and peace of mind during your golden years. At Just SA, we believe one of the most effective retirement planning tools, standing above the rest in terms of reliability, certainty, and stability, is a life annuity – a financial product that provides a guaranteed income for life. 

The life annuity: a very brief history

Life annuities have a fascinating history that spans several centuries. The concept of providing a guaranteed income for life in exchange for a lump sum payment has origins tracing back to ancient Rome!

Life annuities formalised in the 17th century with the establishment of annuity markets.  The interest for an income for life rapidly started to grow in the 18th and 19th centuries when governments and private institutions started offering them as a means of providing a reliable, risk-resistant income.

Fast forward to today

Life annuities have become an integral part of many comprehensive retirement income plans and are no longer a relic of the past. The popularity of life annuities dipped a little towards the end of the 20th century, linked to a trend of retirees opting for living annuities because living annuities are perceived to have greater returns on retirement investments.

However, today, economic uncertainty has become more rife. Many savvy retirees are now realising the dangers associated with having their retirement investment wrapped up solely in investment markets and life annuities have made a solid comeback.

Why choose a life annuity?

Offering a lower risk compared to other retirement income options, a life annuity is a good choice if your primary concern is eliminating some of the uncertainties associated with financial security in retirement.

With a life annuity, your income is paid every month for as long as you live. It will never decrease, no matter what is happening in the investment markets. You choose how you want your income to increase each year. And you also have an option to continue payments to your spouse after you pass away, or for a set period of time.

Speak to a financial adviser and consider a life annuity as your retirement income solution, if you’re looking for:

• An income that is risk resistant.
• A monthly income for as long as you live.
• A choice in how you want your income to increase each year.
• Providing an income for your spouse if you pass away.
• A safety net for your living annuity.
• A fair income that takes your medical history, lifestyle choices and socio-economic status into account.

Life annuities come in various forms, each with unique benefits. It's important to familiarise yourself with the different options available to find the one that best suits your needs.

To get you started, Just SA has created a comprehensive Annuities 101 guide, which provides detailed information about the various types of life annuities, their features and benefits. 

Understanding your options will help you make an informed decision about the life annuity that aligns best with your financial goals. And it is always a good idea to discuss these options with a professional financial adviser.