Retirement

Why a retirement annuity is a good idea

“For many years, retirement annuities (RAs) have formed part of investors’ retirement savings plans.” – According to Glacier by Sanlam, these products have increased in popularity and you should probably consider having one in your investment portfolio.

We’re just not saving enough for retirement

The reality is that most people who enjoy a retirement benefit at work, opt to make the minimum contributions the retirement fund allows for, and it may not be sufficient. People who invest in an RA as well as their employer retirement fund, create a larger pot of retirement savings, which means they have more to invest to secure a better income during their retirement.

Why retirement annuities

Here are 7 reasons why investing in an RA makes good investment sense

1. It provides a kick-start to your retirement savings plan

Whether you are a full-time employee, or self-employed, an RA can propel you on your retirement savings journey – as a stand-alone solution, or as part of a retirement savings plan.

2. Enjoy tax benefits

A portion of your contributions is tax deductible (currently up to 27,5% of the higher of taxable income and remuneration, up to a limit of R350 000 per year). You also don’t pay tax on any interest or dividends and no capital gains tax is applicable.

3. It ticks many of the right retirement savings boxes

An RA potentially offers you the opportunity for investment in a wide range of funds, risk-profiled solutions and share portfolios, customised to suit your needs and risk profile.

4. It’s affordable

A small monthly investment can make a big difference in your retirement savings outcome years from now.

5. Your savings are protected from your creditors

If you are declared insolvent, your retirement annuity investment is protected from creditors – they won’t be able to take from your savings. This ensures your savings will be available when needed most and for what they are intended – saving for your retirement.

6. You can’t touch the investment until you are at least 55 years old

Once you invest in an RA, it’s for the long haul. Committing to an RA until you reach retirement age is sensible.

7. The underlying investment options of your RA are selected based on your particular risk profile

Every investor has different needs, lifestyles and risk appetites that change over time. In conclusion, establishing your risk profile, based on your life stage and financial needs, is a critical first step on your retirement savings journey.