YOUR MONEY: Living annuity, guaranteed annuity, or both?
A reader wants to know if it’s possible to split their retirement funds
23 January 2025 - 05:00
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I am retiring soon and would like to know if a hybrid or blended annuity (with a percentage in a living annuity and a percentage invested in a life/guaranteed annuity) is a possibility. I have been getting conflicting answers.
— A Facebook Fat Wallet Community member
Answer:
You absolutely can split between the two annuities. The living you then draw down as needed (within the minimum and maximum limits) while the guaranteed will pay you a set amount for life. Importantly, the guaranteed annuity is an insurance product and not offered by all living annuity providers. But you can split between multiple providers.
There are a few points to note. On the guaranteed annuity you’ll have to decide if you want annual escalations, to take inflation into account. Opting for escalation will reduce the initial payout amount but will help down the line as it tracks inflation. On the living annuity you can also have multiple products (across different providers if required). You may want to do this as you can then switch some funds into a guaranteed annuity later in life as circumstances change while still keeping some funds in a living annuity.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
READER QUESTION OF THE WEEK
YOUR MONEY: Living annuity, guaranteed annuity, or both?
A reader wants to know if it’s possible to split their retirement funds
Question:
I am retiring soon and would like to know if a hybrid or blended annuity (with a percentage in a living annuity and a percentage invested in a life/guaranteed annuity) is a possibility. I have been getting conflicting answers.
— A Facebook Fat Wallet Community member
Answer:
You absolutely can split between the two annuities. The living you then draw down as needed (within the minimum and maximum limits) while the guaranteed will pay you a set amount for life. Importantly, the guaranteed annuity is an insurance product and not offered by all living annuity providers. But you can split between multiple providers.
There are a few points to note. On the guaranteed annuity you’ll have to decide if you want annual escalations, to take inflation into account. Opting for escalation will reduce the initial payout amount but will help down the line as it tracks inflation. On the living annuity you can also have multiple products (across different providers if required). You may want to do this as you can then switch some funds into a guaranteed annuity later in life as circumstances change while still keeping some funds in a living annuity.
— Simon Brown, founder of Just One Lap
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.