YOUR MONEY: Living or life annuity — which to pick?

Question:

I am about to retire and have a regulation 28 retirement annuity which I now need to use to buy either a living or life (guaranteed) annuity. Any advice as to which is better?

— Fat Wallet Facebook Community member

Answer:

You have many options. First, you can take a third of your RA as cash and use that to invest how you want. This is certainly recommended as it is totally unrestricted.

Second, you don’t have to select either a living or life (sometimes called a guaranteed) annuity. You can have a blend of both, using a life annuity for base costs such as medical bills, and ensure that it has an annual inflation-linked increase. The rest can then be used for a living annuity.

Importantly, you could also take out a number of living annuities with the same or different providers. The idea here is flexibility as you age into retirement. Say you have three living annuities, you could convert one into a life annuity at some stage if you find you need some extra certainty.

— Your Money team 

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