7 Reasons to Invest in a Retirement Annuity | FinPrufe Wealth BlueStar | Sanlam Financial Planners Somerset West


Seven reasons to invest in a retirement annuity

Investing in a retirement annuity (RA) provides the flexibility to choose your investment partners and tailor investment options with guidance from your financial planner. You control when and how much to invest, along with your preferred underlying unit trust choices. While workplace retirement benefits often involve minimum contributions, topping them up with an RA is advisable, enhancing your retirement savings for a more substantial income in your later years.

Why choose a retirement annuity

Reasons why an RA makes sound investment sense

1. Kick-starting your retirement savings: An RA is suitable for full-time employees, contract workers or the self-employed, serving as a standalone solution or part of a broader retirement savings plan.

2.Tax benefits: A portion of the contributions is tax deductible, up to 27.5% of taxable income or remuneration (to a limit of R350 000 per year). No tax on interest or dividends, and no capital gains tax apply.

3.Versatile retirement savings: RAs offer diverse investment options including funds, risk-profiled solutions and share portfolios, customisable to your needs and risk profile.

4.Affordability: Even a modest monthly investment can significantly impact your retirement savings. Use a retirement calculator to determine your ideal monthly contribution.

5.Creditor protection: In case of insolvency, your RA is shielded from creditors, ensuring your savings remain intact for their intended purpose, namely retirement.

6.Locked-in investment until age 55: Committing to an RA until retirement age ensures long-term growth. Restricting access to the investment until at least age 55 prevents impulsive withdrawals.

One last reason to invest in an RA

Tailored to your risk profile

RA investment options are aligned with your risk profile, assessed by a financial planner considering your changing needs, lifestyle and risk appetite over time. The table below exemplifies retirement outcomes for investors contributing R500 a month to an RA.*

Age when investment in the RA commenced253545
Years until retirement352515
Retirement age (in years)606060
Risk profileModerate aggressiveModerateCautious
Return assumption10%9%8%
Investment amount into an RAR500 per monthR500 per monthR500 per month
Value at retirement ageR 1 898 319.03R 560 560.97R 173 019.11

* The example above is for illustrative purposes only.

Glacier Financial Solutions (Pty) Ltd is a licensed financial services provider.

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