WEALTH CREATION - About to retire? Actuaries urge you to do the numbers before rejecting a guaranteed life annuity.
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GUEST – Jeanine Astrup - Actuary and member of the Actuarial Society of South Africa (ASSA) Retirement Matters Committee.
At retirement, the journey towards picking an annuity product that will turn your savings into a regular income for as long as you live is often fraught with frustration and anxiety, acknowledges Jeanine Astrup, a consulting actuary and member of the Actuarial Society of South Africa (ASSA) Retirement Matters Committee.
Astrup says that while you have three choices at retirement - a guaranteed life annuity, a living annuity, or a combination of both – you just don’t know what you don’t know. This can make it difficult to ask the right questions to help you make the best choice for your circumstances. “If you turn to Google for help, you’ll be forgiven for thinking that a living annuity is the only sensible option when you retire,” says Astrup. “After all, a living annuity allows you to pick the underlying investments, adjust income drawdown levels once a year, and bequeath any leftover capital to your beneficiaries.” Guaranteed life annuities, on the other hand, are considered old-school, mainly because it is difficult to source a complete comparison of annuity rates and examples of how much income you can buy with your investments. “You have to speak to a financial adviser for this, whereas you can get a good feel for the benefits of living annuities by doing online research,” says Astrup.
At retirement, the journey towards picking an annuity product that will turn your savings into a regular income for as long as you live is often fraught with frustration and anxiety, acknowledges Jeanine Astrup, a consulting actuary and member of the Actuarial Society of South Africa (ASSA) Retirement Matters Committee.
Astrup says that while you have three choices at retirement - a guaranteed life annuity, a living annuity, or a combination of both – you just don’t know what you don’t know. This can make it difficult to ask the right questions to help you make the best choice for your circumstances. “If you turn to Google for help, you’ll be forgiven for thinking that a living annuity is the only sensible option when you retire,” says Astrup. “After all, a living annuity allows you to pick the underlying investments, adjust income drawdown levels once a year, and bequeath any leftover capital to your beneficiaries.” Guaranteed life annuities, on the other hand, are considered old-school, mainly because it is difficult to source a complete comparison of annuity rates and examples of how much income you can buy with your investments. “You have to speak to a financial adviser for this, whereas you can get a good feel for the benefits of living annuities by doing online research,” says Astrup.
