In this podcast Maya speaks to Deane Moore, CEO of the Just Group about how to use a guaranteed annuity to boost your retirement income, even if you are already in retirement.
If you have a retirement annuity or a pension fund, you should know that when you retire, you can choose to take one-third of the fund in cash, but the other two-thirds need to be used to take out an annuity product that will provide you with an income for life.
If you are about to retire, you need to start thinking about what type of annuity product you should invest in, to provide you with this income for the rest of your life.
Use a guaranteed annuity to boost your retirement income
According to an article by the Actuarial Society of SA, there is currently a window of opportunity for retirees to lock in some of the highest rates in 20 years.
Moore says that over the past five years, there has been an increase in annuity rates of 33% for males and 43% for females for guaranteed life annuities with a 5% annual escalation in income and a 10-year guaranteed period.
Note that the current annuity rates are available only for new guaranteed life annuities, but, this presents a wonderful opportunity for retirees with living annuities who are drawing an income at an unsustainable rate.
Moore says living annuity investors who have no choice but to draw incomes above 5% to make ends meet, thereby eroding their capital, can convert their living annuities to guaranteed life annuities. He adds that a living annuity investor currently drawing an income of, say, 8% could potentially lock in the same level of income for life by switching to a guaranteed life annuity, because of the current high annuity rates.
Anyone buying a guaranteed life annuity now will lock in these current high rates for life. With inflation peaking and the cost of living rising, this is an opportunity not to be missed, and anyone currently in retirement or close to retiring should speak to their financial adviser to discuss their options in detail.