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RETIREMENT ANNUITY | RETIREMENT PLAN

What’s your plan after Retirement? How are you planning to continue living your comfortable lifestyle even after retirement? 

This is where Retirement Annuities come in. It is a lifetime guaranteed monthly or annual income for a retiree until their death. You might be asking how this is different from a Pension Fund or Provident Fund? Let’s break it down for you before we get any further… 

Different types of retirement vehicles:

Pension fund – You can only join a pension fund, through the company that employs you. Your money is managed by the trustees of the fund and your contributions as well as your employer’s contributions are tax deductible. 

Provident fund – with provident fund, you are able to withdraw the entire savings amount as a lump sum when you retire. 

Retirement annuity fund – a retirement annuity fund is independent of your employer, it allows you to choose what funds you invest this money in and you can also make monthly contributions. 

Retirement Annuity Plan 

Retirement Planning is important because it enables you to invest your money for a time when you will no longer be working but want to continue living comfortably with regular income.

However, this is barely ever enough to guarantee a comfortable retirement, simply because the value of money changes over time due to factors such as inflation and interest rates – which is why it is imperative that one makes additional contributions to their retirement plan, over and above the employer’s contribution. 

For example

Someone who’s been contributing R300 per month with their employer doing the same over the past 10 years, that amounts to R600 total contribution per month. This means that this person has saved R72 000 over the past 10 years. If this person continues to work for more than 30 years, given that nothing changes, a contribution of R600 per month over the next 30 years equals R216 000. Adding this to the R72 000 that was saved equals R288 000. 

Disclaimer: this amount does not take into account inflation and interest rates.

Retirement annuities can be taken up as an additional investment plan for retirement which will guarantee you fixed or variable payments over time during your years of retirement.

Over and above your Retirement Annuities, there’s a few things you can do to ensure you still live a comfortable life even after retirement;

1️⃣ Start saving and investing now.  Try to take up a minimum of 10% of your income and put into your savings and investments and increase this as your income increases over the years. You can also automate this process by creating debit orders so that the money is deducted automatically from your account on payday. It’s a great way to grow your wealth.

2️⃣ Adopt healthy lifestyle choices. Your mind, body and income are wealth-building tools. Don’t destroy them with unhealthy and expensive habits and addictions that are expensive to treat.

3️⃣ NEVER cash out your pension funds when you change jobs, rather transfer it to your new employer’s pension fund.

We have pretty much covered anything, you can look up different companies that offer different Retirement Annuity investment plans, compare and pick one that makes more sense to you.