WARREN INGRAM: How to add more life to your living annuity 🔒
You will need to make some difficult decisions as you try to balance the need to maintain your income while preserving your capital. Picture: 123RF/DOLGACHOV
However, living annuities can be dangerous if you’re not in a healthy financial position. As a living annuity member, if you are financially compromised, a big market crash is devastating to your financial wellbeing. As an aside, low-income retirees will suffer the most from the blatant profiteering by certain retailers that are thriving during lockdown but are still refusing to pay full rent.Many retirees with living annuities are therefore in a tough position. At each anniversary of your living annuity, if you try to maintain the value of what you draw on a monthly basis, you will have to increase the percentage you take from your money.
Unfortunately, a high-growth portfolio is more prone to big losses in a market crash. The effect of the crash would be even more severe if you draw a large percentage of income. The Treasury has been hard at work helping retirees in these difficult times, increasing the rate of interest that people can earn from RSA retail savings bonds. These investments are similar to fixed deposits at a bank, except that the interest rate is guaranteed by the government.
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