What is the difference between a Living Annuity & Life Annuity?
At retirement you can access up to one-third of your retirement savings in the form of a cash lump sum.?With the remainder you are obliged to purchase an annuity which provides regular income during your retirement.
There are two types of annuities, Living Annuities and Life Annuities.
LIVING ANNUITY
This option provides more flexibility. You can choose an annual income drawdown percentage of between 2.5% and 17.5%, paid to you according to your preferred income frequency. Remember you can change the income drawdown percentage and income frequency, or both, once per year.
Another benefit is that you can have the remaining capital paid out to your nominated beneficiaries when you die.
The disadvantage of this option however is the risk of depleting the retirement funds before you die, making it vital to live within your means. Performance of markets can of course also have an impact.
Therefore it is extremely important to make sure you invest your living annuity wisely, using an investment professional who can assist you with reaching your retirement goals.
领英推荐
LIFE ANNUITY
This option, on the other hand, offers a pre-determined monthly income for the rest of your life, with the option of it increasing it with inflation. Here there is no need to worry about whether your retirement savings might be depleted prematurely and you can take comfort in having a guaranteed income for the rest of your life.
This option provides less flexibility, and when you pass away, the money dies with you – effectively meaning there is no remaining capital to leave to your beneficiaries or estate.
Remember, everyone's circumstances are unique and therefore it is highly advisable to discuss the options with your financial advisor to make sure your choice fits in with your retirement planning.
Feel free to contact me for assistance with your Financial Planning needs.
Francois Strydom
071 671 4301
Follow me on FACEBOOK