Retirement annuities still work

Planning well for retirement is essential to ensure your long-term financial well-being. One key aspect of retirement planning is choosing the product, or combination of products, that will best enable you to meet your retirement goals. Earl Van Zyl and Tiaan van Wijk discuss the various investment products that investors typically use to save for retirement and shed some light on the trade-offs that investors need to consider.

The process of choosing the most appropriate product, or products, to save for retirement can seem daunting. Among the available options, retirement annuities (RAs) have long been touted as a suitable option for most long-term savers, given the favourable tax treatment of contributions. However, some argue that the investment limits under Regulation 28 of the Pension Funds Act (“Regulation 28”), the limited access investors have to their accumulated savings in these products before retirement, and the requirement to purchase an annuity with your savings in an RA at the point of retirement outweigh the tax benefits.

We will illustrate that, when viewed through a lens of the income in retirement that various products provide, RAs remain a good option for most investors, even after accounting for the restrictions that apply. As always, it is important for every long-term investor, together with their independent financial adviser, if they have one, to understand how our simplified examples would apply to their personal situation so that they can assess how best to use our insights. Our analysis assumes that the product rules do not change in any material way in the future.

Comparing the different products

Read full article:  https://www.allangray.co.za/latest-insights/retirement/retirement-annuities-still-work/

August 18 2023 By Earl Van Zyl and Tiaan van Wijk