The Wealth Room

Living Annuity

What is a living annuity?

A living annuity is an investment product that you will use to invest your retirement savings in order to generate and draw a stable income after you retire.

How do you invest in living annuities

Once you retire, you have to take at least two thirds (you can take the full amount, you just cant take less) of your Retirement Annuity and invest that into a Living Annuity Investment Vehicle.

The other options is to transfer funds from an existing Living Annuity to another Living Annuity, however this is a more complicated situation and is admin intensive.

With a Living Annuity, you can control your investment, by selecting your own underlying Unit Trust and how much you want to draw from the fund on a monthly basis, as long as they meet the limits set by legislation surrounding the Living Annuity.

The Living Annuity will generate an income for you as long as there are funds in the investment, so the income stream is not an income that is guaranteed for life, so pay special attention to how much you are drawing down on the product on a monthly basis.

What is a guaranteed life annuity?

A Guaranteed-for-life annuity is an alternative product that can be used to provide an income stream during retirement for the rest of one’s life. However this option is limited to what control you have on the underlying investment, as the insurer carries the full investment risk and the risk of you living longer than your life expectancy. The income stream is also out of your control as the insurer provides you with all of those details.

My suggestion is to get in touch with a Certified Financial Planner® so that they can guide and direct you in selecting the right option between the Living Annuity and Guaranteed Life Annuity.

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