A Living Annuity is one of the most flexible retirement income tools available in South Africa.
It lets you convert your retirement savings into regular income while your money stays invested. Many retirees choose to work with a trusted financial adviser to help manage this and ensure their plan stays on track.
Here’s how to manage your Living Annuity effectively, with the help of professional guidance.
Understand Your Role as an Investor
Working with an adviser means you get support in navigating how your money is invested and how much income you draw.
Together, you can assess:
- Your time horizon
- Risk tolerance
- Income needs
- Current market conditions
You and your adviser decide on your drawdown rate (between 2.5% and 17.5%) and your investment mix, adjusting as your needs evolve. This flexibility is what makes Living Annuities attractive—especially when guided by sound advice.
Asset Allocation Matters
Your Living Annuity is invested across different asset classes.
Each serves a purpose:
- Equities: Offer long-term growth potential but come with higher volatility
- Bonds: More stable, with lower returns
- Real estate: Good for inflation protection and passive income
- Cash: Low risk but also low return
Diversifying your asset allocation can reduce risk and increase sustainability. Your adviser can help you align your allocation to your retirement goals.
Understand the Role of Fees
Fees are an essential part of any investment. Working with a transparent, professional adviser ensures that you understand what you’re paying for and what value you’re receiving in return.
Be aware of:
- Fund management fees
- Administration fees
- Advice fees
Consider Passive and Active Investing
Both passive and active investment strategies play a role in building a resilient Living Annuity portfolio.
- Passive investing, such as index tracking, mirrors the performance of a market index (e.g. S&P 500). It can offer lower costs, consistency, and less reliance on individual stock selection. It’s useful for long-term growth and limiting emotional decision-making.
- Active investing involves fund managers selecting specific assets they believe will outperform the market. This strategy aims to take advantage of short-term opportunities or avoid downside risk, especially in volatile markets.
Your adviser can help you find the right blend of passive and active investments based on your goals, risk tolerance, and market outlook.
Offshore Exposure Helps Spread Risk
With a Living Annuity, you can invest up to 100% offshore. This gives you protection against local market downturns or currency depreciation. Your adviser can help you decide the right offshore mix based on your retirement plan.
Adapt to Market Conditions
One of the biggest benefits of working with an adviser is the ability to adapt. Your adviser can help adjust your asset allocation, switch funds, or change your drawdown rate as markets shift.
For example, during a downturn, you might reduce equity exposure and lean more into bonds. Or if your income needs change, you can adapt your withdrawals accordingly.
Avoid One-Size-Fits-All Portfolios
Everyone’s retirement is different. A good adviser helps you personalise your strategy based on:
- Financial goals
- Income needs
- Risk profile
You gain peace of mind that your money is working for your unique situation, not following a generic model.
Final Thought: Advice Adds Value
Managing a Living Annuity is about control and flexibility—but it also requires discipline, smart decisions and regular review. An experienced adviser can help you make confident choices and avoid costly mistakes.
To make the most of your Living Annuity:
- Start with a sustainable drawdown (ideally 4% or less)
- Diversify your investments
- Understand your fees
- Review your plan annually with your adviser
Not sure where to begin? Speak to an Investonline adviser for a free comparison report and guidance tailored to your goals. Or try our Living Annuity Calculator to explore drawdown and return scenarios that match your plan.
