Living annuity asset allocation: Should it change after age 70?

As retirees approach age 70, it can feel natural to consider shifting their living annuity to a more conservative investment mix. The idea is simple – reduce exposure to growth assets like equities and move more capital into traditionally safer asset classes like bonds or cash in an effort to preserve capital and limit volatility.

You may be wondering if this shift is always necessary. In this article, we will look at whether changing your asset allocation after age 70 is required, the pros and cons of such a change, and how to go about selecting the appropriate asset allocation that will best align with your financial goals, investment horizon and risk tolerance.

Living annuity recap

A living annuity is a post-retirement income product which keeps your savings invested while also allowing you to draw an income throughout your retirement years. Your living annuity is funded by your retirement savings from vehicles such as retirement annuities or preservation funds. From the age of 55, you may convert your retirement savings to an annuity - either a life or a living annuity. A living annuity also offers flexibility for investors, as you may select both your drawdown rate and make adjustments to your underlying portfolio.

A drawdown rate is the percentage of the total value of your annuity that you draw as income each year; this rate can be amended annually at the policy anniversary date. It will need to be between 2.5% and 17.5% per annum. You are also able to select your preferred payment frequency. This may be annually, biannually, quarterly or monthly.

A drawdown rate of 4% is generally thought to be sustainable over the long-term by financial experts, and may help ensure that your capital does not run out. Your underlying funds refer to the specific funds that your living annuity capital will be invested in.

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Why living annuity asset allocation matters even after 70

At age 70, you may still need your living annuity for 20 to 25 years, or even more. As such, you may need to be more strategic when it comes selecting your asset allocation, as your portfolio may still need to generate growth to support your income needs over the long term.

Two key risks remain relevant in retirement: longevity risk and inflation risk. Longevity risk refers to the possibility of your capital running out during your lifetime. Inflation risk is the gradual erosion of purchasing power over time. As prices increase, the same amount of money buys fewer goods and services each year, which means your income may not stretch as far as it once did.

Asset allocation plays the biggest role in the performance of your living annuity, accounting for over 90% of returns, as seminal research from Brinson, Singer and Beebower shows.

The case for reducing risk after 70

As you get older, your tolerance for investment risk may decrease. As your timelines may be shorter, this may mean that there is less recovery time available after a market downturn or market crash. For this reason, some retirees choose to shift part of their portfolio into more conservative assets in an effort to preserve capital and reduce overall risk.

This may involve increased exposure to bonds and cash. Bonds can add stability to your portfolio, but returns may be lower than those of growth assets (this isn’t to say that bonds will never outperform what’s expected, but that it is generally seen as a more conservative option.) Cash is the most stable and liquid of the asset classes, but it is also likely to generate the lowest returns of all the asset classes.

Moving towards a more conservative allocation can also provide greater peace of mind for some retirees, especially if market fluctuations cause concern. However, it’s important to make sure that a shift towards lower-risk assets doesn’t end up overly limiting the potential for growth within the portfolio.

The case for maintaining growth exposure

While reducing risk may seem appealing later in retirement, you shouldn’t overlook the role that growth assets can still play in a living annuity. Even after age 70, your investment horizon may still be many decades long. During this time, your portfolio may still need to generate enough growth to support ongoing income withdrawals and keep pace with inflation.

Equities might be the most volatile of the asset classes, but they are also likely to generate the best returns over the long term. Equities have historically produced returns above inflation, by around 7% annually, over the long term (based on JSE All Share Index performance versus CPI from 1960-2020), as data suggests. Keep in mind, however, that past performance doesn’t guarantee future results. Real estate can also produce some good returns as well as be a good hedge against inflation. Adding in some protection against inflation is advised, as over time, inflation can negatively affect the purchasing power of your money.

Portfolios that are too conservative may struggle to beat inflation. Considering a more balanced portfolio, including a mix of different asset classes, may instead be a good approach to cater for these years.

A practical approach: Adjust, don’t abandon growth

You may consider strategically adjusting your asset allocation instead of making any drastic changes in order to align your portfolio with your changing investor profile and long-term financial goals. Your investor profile looks at both your risk tolerance levels and your investment timelines.

A well-diversified portfolio, which includes a variety of asset classes, can be a good approach to manage risk versus reward, allowing you to include both equities and bonds and/or cash in your portfolio. You may also wish to include some offshore exposure in your portfolio. This can act as a good hedge against any local market volatility as well as any depreciation of the Rand.

At 10X, you’ll have the freedom to adjust your portfolio by choosing from a selection of carefully curated funds, each with a different mix of assets and geared towards different investor profiles. You can align your changing needs with the fund that best suits you.

We also offer a living annuity that can be invested 100% offshore, as living annuities are not subject to Regulation 28 of the Pension Funds Act. This may appeal to investors who are already heavily invested in the local South African market. Please visit our funds page for the most up-to-date fund information.

The value of index-based investing

At 10X, we make use of an index tracking investment strategy alongside a more active approach to asset allocation.

Active management is when a manager looks to select the winning stocks with the aim of getting the best returns. This strategy may involve a number of different activities, such as research, analysis and buying and selling. This may then result in higher costs, which could be passed on to you as higher fees. This approach may also not always produce the desired results, as according to the latest SPIVA South Africa Scorecard (as of 30 June 2025), 67.61% of South African actively managed equity funds underperformed the S&P South Africa DSW Capped Index over the ten-year period ending 30 June 2025.

Index tracking is where a benchmark index, such as the ‘S&P 500’, is mimicked, with the aim of producing the same returns. With this approach, there are fewer research and trading activities, which may result in lower costs, ultimately meaning fewer fees being passed onto you, as the investor. Index-based investing also reduces what is known as manager risk – the risk that an active manager’s decisions may underperform the broader market.

Our strategy focuses on long-term results, generating consistent returns for clients over time. This kind of strategy may resonate well with retirees who are looking for consistency and predictability, lower fees, and broad market exposure, rather than relying on the success of individual stock selections.

Why fees matter even more after 70

Fees can be a key factor in the growth of your living annuity. Higher fees may mean that there are fewer returns available to compound and grow over time, while lower fees may mean more returns available to reinvest and grow. As you are already drawing income from your capital, you would ideally look to minimise fees in order to keep more of the capital invested, as it may potentially grow and compound over time. Here are some of the fees that you may expect to see deducted:

• Administration fees: These will be the fees charged for administration-related tasks. These will be tasks such as compliance, reporting and tax.
• Advice fees: If you are making use of an advisor, they will charge fees for the advice and services that they offer. There may be both an initial and an annual fee charged.
• Management fees: These are the fees charged for the running and management of the fund.

Let’s look at an example which illustrates the effect that high fees may have on your living annuity. We will assume the following for this example:

• Investment amount: R2 million
• Investment period of 25 years
• Drawdown rate: 4%
• Return of 12% per annum
• An inflation rate of 6%

Example 1 (0.86% Fees): Real investment value is approximately R2.36 million.

Example 2 (3% Fees): Real investment value is approximately R1.45 million.

A small difference in fees can have a significant impact on your living annuity. This is especially evident when fees are compounded over time. This example is for illustrative purposes only, and actual results may vary. You can learn more about the impact of fees here.

At 10X, our fees are low, simple and transparent, allowing for more of your returns to be reinvested and allowed to potentially grow and compound over time. Fees on retirement products are usually less than 1%, depending on the amount invested and the product selected. Please explore our products for the most up-to-date fee information.

An important metric to consider is the Effective Annual Cost (EAC). This was introduced in 2015 by ASISA. This metric allows an investor to see the total cost of owning an investment product over a one year period of time. All factors being equal, a higher EAC would mean that less of your investment returns can be reinvested and potentially grow and compound over time, whilst a lower EAC may mean that more returns may be reinvested and allowed to potentially grow over the long term.

The EAC of an investment should just be one factor to consider when comparing different service providers. This useful EAC calculator, provided by 10X as a part of our free online suite of tools, allows you to compare and evaluate the EAC charged by different service providers.

Checklist: Questions to ask at age 70

Turning 70 can present you with an opportunity to review your annuity and make sure it still aligns with your long-term goals. Markets and personal circumstances change, and your investment timeline may shift. Let’s have a look at some important questions to consider when you reach age 70:

1. Are the fees that I am paying too high? Even small differences in fees can have a major impact over the long-term, especially when you are drawing an income from your portfolio.
2. Have I considered my EAC? Understanding your total investment costs can help you compare providers and make sure that fees stay competitive.
3. Does my asset allocation still align well with my investor profile? Your portfolio should reflect your risk tolerance and expected investment horizon.
4. Is my asset allocation too conservative or too heavily invested in cash? While stability can be important, holding too much cash may limit your ability to keep up with inflation.
5. Is my portfolio well-diversified? A diversified portfolio that includes a mix of asset classes can balance risk and return.
6. Is my drawdown rate sustainable? Checking whether your existing drawdown rate can be maintained over the long term can decrease the chances of your annuity running out of capital.
7. When was the last time I reviewed my living annuity? Regular reviews, at least once a year, can help you stay on track and keep your investment strategy aligned with your goals.

If you find that you need assistance in terms of making some adjustments after considering these questions, please get in touch with the knowledgeable and experienced investment consultants at 10X, who are here to guide you through any changes that may be required.

Living annuity asset allocation after 70 is about balance, not fear

When considering asset allocation from age 70, the focus should be on finding a balance, rather than making fear-based decisions. If you do see the need to make some changes, these adjustments should not be emotional and should instead be strategically and carefully made, with a focus on your investor profile and long-term financial plan and goals. Longevity risk should always be a central focus, along with minimising fees and selecting a sustainable drawdown rate.

At 10X, it is easy and simple to adjust your portfolios if the need arises. Our living annuity is low-cost and transparent, while always focusing on excellent returns to help you meet your retirement income goals. Get in touch today and retire your way with 10X Investments!