Securing your financial future
Life annuities
Many of us envision having enough money to live well in retirement without worry. A life annuity is one type of financial product made to offer financial benefit and peace of mind.To sufficiently plan and prepare, you should plan for your retirement as early as possible by ensuring you contribute sufficiently to your retirement savings or supplement this by investing in a retirement annuity. Try to decide what you will do with your retirement benefit at least three to five years before your retirement date to allow you to source more information about the retirement options available to you.
A life annuity is where you take your lump sum or your two-thirds retirement savings in exchange for a series of guaranteed income payments for life from an insurance company. Annuities can be a valuable tool in financial planning when used correctly. It functions as a "guaranteed paycheck" for the rest of your life, providing financial security, particularly in retirement.
Life annuities offer several significant advantages that make them an appealing alternative for people wishing to protect their retirement or build a consistent income stream:
• Financial security for life: The most significant benefit is that you will not outlive your income. Once you purchase an annuity, you are guaranteed to receive regular payments for the rest of your life. This is particularly useful in today's environment, as life expectancy is increasing. Furthermore, you can also add your spouse and therefore if you as the annuitant passes away, the surviving spouse continues to receive payments for life.
• Predictability: Knowing how much money you'll receive each month with a life annuity might provide peace of mind. It provides a consistent income stream that does not change with market conditions, which is a key issue for people who rely on investments.
• Protection against inflation: Some life annuities come with inflation protection options. This means the payments can increase with a specified percentage, over time to keep pace with inflation, helping you maintain your purchasing power in the future.
Life annuities aren’t for everyone, but they’re a great option for people who want to ensure a steady income stream throughout their life. The ideal person is typically:
• Retirees: A life annuity can help you plan and assist you to cover your ongoing expenses. It ensures that you have a set income after you stop working, allowing you to enjoy your golden years without worry or fear.
• Risk-averse people: People who are nervous about market fluctuations or outliving their savings may find life annuities appealing. The fixed nature of annuity payments means you don't have to worry about stock market crashes or bad investment years.
• People with longevity concerns: If you’re in good health or come from a family with a history of long life, a life annuity may be especially valuable. It ensures that, regardless of how long you live, your income continues.
Life annuities are for anyone seeking to secure a steady income stream in retirement. They offer financial peace of mind, predictability, and protection against outliving your savings. Whether you're simply looking for a way to ensure that your golden years are truly worry-free, a life annuity could be an excellent option to consider.
Of course, life annuities aren’t one-size-fits-all, and it’s essential to weigh the pros and cons considering your own financial goals. By speaking with a trusted financial adviser, you can determine if this is right for you and take a big step toward securing your future.
* Andreas Shipanga is a Corporate Sales Consultant at Old Mutual Namibia.
** Opinion pieces and letters by the public do not necessarily reflect the opinion of the editorial team. The editors reserve the right to abridge original texts. All newspapers of Namibia Media Holdings adhere to the Code of Ethics for Namibian Media, a code established jointly with the Media Ombudsman.