It’s fair to say that only a select group of South Africans can save enough money to retire comfortably.The financial objective for the majority of retirees is to be able to accept an income on which can sustain them for the rest of their lives. So Extremely important to understand and consider the products that can help increase the longevity of retirement savings.

In case if you have a retirement annuity or pension fund, you can take one-third of the capital in cash; you’ll need to buy an annuity for the remaining funds. You may have a provident fund as well; in which case, it may be possible to opt for a full cash pay-out (this depends on the rules of the fund).

Investors may think that they have to choose between a life annuity or living annuity. However, an independent financial adviser (IFA) can explain and help you understand the benefits of using both products; they can help you overcome potential risks including outliving your money as well as inflation eroding the buying power of your monthly income over the long term.

Guaranteed for life

A life annuity, at a basic level, can be seen as a product that will pay retirees a pre-determined guaranteed income for the duration of your life, which effectively insures you against the risk of outliving your money.

In return for this investment service, the investor gives consent to the insurer that allows them to take full ownership of your capital, meaning beneficiaries don't have a claim to the money when you die. On the Other hand, it is possible to protect against this eventuality by adding an initial guarantee period to the annuity. that conditions, beneficiaries can receive the benefit until the period lapses. However, it should be noted that if you choose this option, you’ll receive a lower monthly income.

In case that you feel that you want to invest in a product that is more flexible, and allows you to leave your capital to beneficiaries, it may be worth looking at a living annuity.

Living annuities give you flexibility

A living annuity is also known as a linked annuity because the income cannot be guaranteed and is dependent upon (or linked to) the performance of underlying investments. The product can give you the benefit of flexibility, but the longevity of your income may be affected as well as potential susceptibility to market risk.

If you are thinking about going down the living annuity path, it can be useful speaking to an IFA who can help you with important decisions about your financial wellbeing.

The hybrid approach

There seems to be a misinterpretation that the investing cycle comes to an end after retirement. On the contrary, you may have many years ahead of you to live; they can be used to generate investment returns at the same time as drawing an income. With this in mind, it may make sense to choose a living annuity and a guaranteed life annuity.

The bottom line is that retirement shouldn't mean the end of financial planning and investment. There are still ways by which you can make returns and live a comfortable life.