Rebound for retirement
If you were invested in balanced funds and stayed invested through the market turmoil of 2020, we have some good news. You can secure a guaranteed income for life that is over 15% higher than it would have been had you invested on the 1st of January last year before the market crash; an income that targets growth in line with inflation.
This demonstrates the value of establishing a robust retirement plan and sticking to it, especially through market turmoil.
By contrast, if you were one of the many investors who became unsettled and switched to more conservative options, you would have watched your portfolio lose about 15% during March/April last year. Furthermore, you would have locked in your losses and missed out on the subsequent market recovery.
And if you did this inside of a standard living annuity, you would have negatively impacted your retirement income, which would already have been negatively affected by the five years of relatively poor market returns that preceded 2020.
This exposes the risks associated with standard living annuities where, because you can change investment decisions, you carry your own investment risk and your own longevity risk, which is the risk of money running out of road before you do. Unfortunately, our Just Retirement Insights survey showed that many retirees fell into this camp.
So, if you are facing retirement, here are some things you may want to consider:
Think about your retirement savings in two pots
- A pot to ensure you have enough income to cover your essential expenses for life.
- A second pot for discretionary spending or to leave a legacy.
Choose appropriate investments for each pot
- An appropriate investment for the first pot is a life annuity, or you can allocate a portion of your living annuity assets to a lifetime income portfolio within certain living annuities.
- Once the first pot is secured, you can consider options that provide flexibility, growth and a legacy for beneficiaries.
It's a good time to lock-in a retirement income for life
- Recovering markets have increased the value of retirement savings.
- Long-term interest rates are high, which translates into good value for money for life annuities.
- Together, these factors allow you to lock-in a higher guaranteed income for life.
Consider JuLI - for a guaranteed level of income that benefits from market growth
- Just Lifetime Income – JuLI - is a new-generation with-profit annuity designed to withstand market conditions to guarantee your income for life, while providing annual increases linked to the performance of a balanced fund.
- It is available for investments from retirement savings and discretionary savings.
- JuLI is accessible as a standalone life annuity or as a lifetime income investment portfolio in certain living annuities.
- It is available for investment from retirement savings and discretionary savings, and is accessible through some of SA's prestigious living annuity providers.
This intended for information purposes only. It should not be regarded as advice as defined in the Financial Advisory and Intermediary Services Act 37 of 2002, or any form of advice in respect of the policy, retirement, tax, legal or other professional service whatsoever. You are encouraged to seek advice from an authorised financial adviser, or to independently decide that the financial product is appropriate for you based upon your own judgment and understanding of your financial needs.
26 April 2020
Do you need more information?
Consider seeking advice from a qualified financial adviser. Contact us to request the details of an adviser in your area, or to find out more about our offering.