Sustainability

When faced with the decision to convert hard-earned retirement funds into a reliable income in retirement, many are still unsure if it will be enough to last and rely heavily on their financial advisers to help them.

A new white paper on living annuities and the impact of drawdown rates, based on a study of 20 000 anonymous living annuitants, has been published by retirement income specialist Just SA.

Podcast: Maya Fisher-French speaks to Deane Moore, CEO of Just SA about how to use a guaranteed annuity to boost your retirement income, even if you are already in retirement.

Secular market trends in particular, can set retirees up for a happy retirement with enough money to last a lifetime, or an unhappy retirement where their portfolio is depleted prematurely. 

While retirees' attention traditionally centers around not wanting to lose capital at death, along with an inherent desire to retain flexibility and defer big financial decisions, we believe financial advisers have an important role to play in helping to reframe the narrative surrounding annuity options in retirement.

A surefire way to secure a stable income in retirement is through a life annuity. But the biggest detractors from a life annuity are often the perceived lack of flexibility, as well as the belief that leaving a capital legacy for beneficiaries is not possible.

Historically, the inability to adjust income from a life annuity has led to many retirees self-insuring against running out of money and is the reason why many South African retirees opt for a living annuity.

Risks in retirement are not new but may have been exacerbated with the COVID-19 pandemic and its effect on lifestyles. Yet there are some practical steps that you can take to best achieve health and wealth in retirement, regardless of market conditions. 

What effect can a zero percent increase have on your retirement savings? As contributions to employer pension or provident schemes are based on a percentage of your salary, the answer is clear. The lower your increases, the lower your contributions to your retirement fund will be, as well as the amount of your employer’s contribution. And the less money you have invested to capitalise on any investment growth. 

MONEY MARKETING focused on the benefits of a with-profit annuity in their February digital magazine (page 28). Since its launch in 2015, Just has focused on enhancing the features, transparency and performance of with-profit annuities in South Africa for the benefit of pensioners and advisers. With-profit life annuities offer retirees an income for life, which will never reduce regardless of what happens to investment markets or how long a retiree lives.

According to the WALL STREET JOURNAL, if you want to maximise how much you can safely spend in retirement, some economists say, sell some of your bonds and buy lifetime income annuities. [Subscription required]