Investing in a retirement annuity is one of the better ways to save for your retirement.
Saving for retirement is a critical part of personal financial planning
Whether you are in your first job or an established professional, saving for your retirement should be an important part of your financial plan. To be able to support yourself comfortably after you retire, you need to set money aside for your retirement throughout your working life. This will give it time to grow sufficiently to provide you with an income during retirement.
There are different investment options to save for retirement. One of these is investing in a retirement annuity (RA), a long-term investment vehicle specifically aimed at helping you save for retirement. Most reputable financial services providers offer RAs. So, how does an RA work and why should you consider one?
Your retirement savings will impact your life in your golden years
Statistics show that only 6% of South Africans can afford to retire comfortably. That means a massive 94% of our citizens won’t have enough money to provide them with a satisfactory income in retirement – they will either have to downgrade their lifestyle, work for longer, or be dependent on family and friends and state grants. Prioritising your retirement is therefore an important life decision to avoid unnecessary anxiety and hardship at a time when you should be enjoying life.
What is an RA?
An RA is basically a personal pension plan. You can take out an RA yourself, which is why an RA is a great option for people:
With an RA you can choose the underlying investments yourself, subject to the regulatory limits for retirement funds. At retirement, you must use at least two-thirds of your lump sum to invest in an income-producing annuity.
Benefits of investing in an RA
A retirement annuity is one of the best ways to save for your retirement, for the following reasons:
This means you will not be tempted to pull your money out and spend it before retirement, sabotaging your long-term outcomes.
A financial advisor can help you invest in an RA
While there is no doubt about the benefits of using an RA to save for your retirement, knowing how to incorporate it in your financial plan can be hard. When should you start investing? How much should you invest? Which RA should you choose and how do you choose the underlying investments? That is where an expert financial advisor can help you make informed decisions that are appropriate for your specific circumstances and needs.
Want to know more? Here’s what to do:
This information is intended for general information purposes only and does not constitute legal advice.
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