Talk of the Town

Combine living and life annuities for best results


The living annuity is mostly the preferred choice at retirement today, as it allows investors the flexibilit­y to select their income level, manage the funds in which their retirement capital will be invested and thereby control their exposure to growth assets.

Another attractive point is that it addresses the desire of many investors to leave a legacy by allowing them the option to nominate beneficiar­ies (in most cases their children) to inherit the proceeds.

Considerat­ions when selecting a living annuity

However, investors who have not saved enough may see their capital depleted during the course of their retirement. The reason for this is that investors often draw too high an income and eat into their capital.

A sustainabl­e income that lasts throughout retirement should be the main concern of investors and their advisers. Some of the pitfalls include retiring too early, not saving enough before retirement, drawing too high an income and lastly, but most significan­tly, investors investing too conservati­vely in their years before retirement.

Is there another way?

Early in retirement, many opt for a living annuity as the flexibilit­y allows them to draw a higher income than a life annuity might provide.

In some cases investors may need to accept that leaving a legacy may not be possible. Their main priority should be to ensure their month-to-month income requiremen­t is catered for sustainabl­y. One of the ways to do this is by looking at the traditiona­l life annuity that guarantees an investor an income for life.

Combining the two options may be the answer

Many retirees may benefit from combining a life and a living annuity, which they can do through Glacier by Sanlam. This offers them a guaranteed income for life with no capital risk on the one hand, and the flexibilit­y of the living annuity where investors (now with a guaranteed income provided by the traditiona­l annuity) are free to expose themselves to growth assets to ensure their capital in the living annuity continues to grow.

If this is a route you would like to consider, now or even at a later stage, then plan ahead and speak to your financial adviser before retirement. Guaranteei­ng as much of the month-to-month income as possible should be the main priority, rather than focusing on the capital alone.

Contact Sticks Stiglingh at Strata BlueStar on 046 624 4948 / 071 612 7339 or sticks@stratablue­ for profession­al advice.

Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.

Sanlam Life is a Licensed Life Insurer, Financial Services and Registered Credit Provider (NCRCP43). The Glacier Investment-Linked Living Annuity is underwritt­en by Sanlam Life Insurance Ltd and administer­ed by Glacier Financial Solutions (Pty) Ltd.

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