Living annuity planning: Why retirement is not the end of your investment journey

Building blocks to a lasting Living Annuity

Our panel of experts discusses living annuities, sustainable drawdown rates, offshore investing, and everything else one might need to consider to ensure a comfortable retirement. Read more

Retirement is often viewed by investors as the end of the retirement journey, but for those with a living annuity, it actually marks a new phase in their investment journey. Your living annuity plays a major role in providing you with a sustainable income during your retirement years. Your living annuity will need to last you for your retirement years, which may span 25 to 30 years or even longer.

Living annuity planning requires careful and strategic thought, discipline and a focus on the long term and ultimately the sustainability of your living annuity capital. In this article, we will take a deeper look into the importance of effectively managing your living annuity and the key factors to keep in mind during your retirement years.

What is a living annuity?

A living annuity is a flexible post-retirement income product that provides you with an income while the capital remains invested in the markets. It is funded by your retirement savings from your retirement annuity, preservation fund or similar. You can select both your drawdown rate and your asset allocation. Your drawdown rate is the percentage of the total value of your living annuity that you withdraw as income.

This rate may be adjusted each year at the policy anniversary date. The rate you select may range from 2.5% to 17.5%, depending on your requirements. It’s important to select your drawdown rate carefully, as a rate that is too high may mean your capital depletes too quickly and you could outlive it; this is called longevity risk. You can also select a suitable payment frequency; this may be annual, biannual, quarterly, or monthly.

Why retirement is not the end of investing

Retirement is the start of a new investment phase, during which you have transferred your retirement savings to your living annuity. Your living annuity is invested in the market, and it needs to be carefully managed throughout your retirement years. Your retirement may span a few decades, so you would ideally want your capital to grow while you also draw income from it.

You will need to give careful thought to your drawdown rate and your asset allocation. Another important consideration is inflation. Inflation has the effect of reducing the purchasing power of your money. Even modest levels of inflation can have a significant impact on a retirement that spans a few decades.

As a result, your portfolio should ideally be positioned to generate growth that exceeds inflation over the long term, helping to preserve both your capital and your standard of living.

The role of drawdown rates in your investment journey

Your drawdown rate can have a major impact on your living annuity capital and its sustainability. A higher drawdown rate may deplete your capital too quickly, whilst a moderate drawdown rate may mean that your living annuity is more sustainable and able to provide for you for the duration of your retirement years. If you have a higher drawdown rate, it means there is less capital available to potentially grow and compound over time.

As mentioned, longevity risk is the risk of outliving your living annuity. This is a real concern which highlights the importance of careful management of your living annuity. A drawdown rate of 4% is considered sustainable by most experts, but nothing can be guaranteed. If you are able to choose a lower drawdown rate, this is advisable, as it allows more capital to remain invested.

Why investor behaviour still matters in retirement

Investor behaviour during retirement is still a key factor. The decisions that you make and the way that you react when it comes to your living annuity can have an impact on your capital over time. It’s important that you aren’t distracted by short-term market noise or react emotionally to market volatility. These are part and parcel of the investment journey and are to be expected.

Your focus, as an investor, should be on the long-term and your long-term financial plan and goals. You would also want to avoid reviewing your living annuity too often. Generally, it is sufficient to review your living annuity each year before the policy anniversary date. This is the cut-off date for any changes to your drawdown rate. You would also want to avoid chasing returns and switching funds unnecessarily. Your target should instead be long-term, consistent growth and returns in your portfolio.

The importance of asset allocation after retirement

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. Therefore, it is important that your asset allocation is carefully selected from the available asset classes: equities, real estate (property), bonds, and cash. 10X gives you the freedom to adjust your underlying portfolio by choosing from a selection of different investment funds, each carefully curated with a different mix of assets and geared towards different investor profiles.

Cash is the most stable and liquid of the asset classes and will likely also generate the lowest returns. Bonds are also stable, and you can expect some lower returns. This doesn’t mean bonds will never outperform expectations; it just means they're seen as a more conservative option. Real estate is likely to deliver strong returns and serve as a good hedge against inflation. Equities will likely produce the best long-term returns while also being the most volatile among asset classes.

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), however, past performance does not guarantee the future results. It’s important to align your asset allocation with your long-term retirement goals and your investor profile. Your investor profile will review your investment timelines and risk tolerance. Your risk tolerance levels are determined by your appetite for risk. Your asset allocation can be adjusted to match changing needs and circumstances over time.

You may also wish to consider investing your living annuity offshore. A living annuity is not subject to Regulation 28 of the Pension Funds Act, meaning that there are no restrictions on how much of your living annuity you invest offshore. You will need to ensure that your service provider is able to offer this, as some providers may have their own investment limits. At 10X, we are able to offer you a living annuity that may be invested 100% offshore. Our funds at 10X are well-diversified, offering you access to a range of different asset classes. A well-diversified portfolio can help you to balance both risk and return in your portfolio. Please visit our funds page for the most up-to-date fund information.

Why fees still matter in retirement

Fees are still just as important in retirement, as they can reduce the returns available for reinvestment and compound growth over time. Lower fees may mean there are more returns available to reinvest, potentially growing and compounding your capital over the long term. Here are some of the common fees that you may expect to see deducted from your living annuity:

• Management fees: These are the fees charged for the running and management of the fund.
• Administration fees: These fees are charged for the administration tasks that are related to the fund. These will be activities such as tax, reporting and compliance.
• Advisor fees: If you have an advisor, they will charge fees for the advice and any other services that they give you. There will often be an initial and ongoing fee charged.

Let’s look at an example that helps compare the difference between low fees of 0.86% and higher fees of 3% per annum on your living annuity when compounded over 25 years.

We will assume the following information in this example:

• Investment amount: R4 million
• Investment period of 25 years
• Drawdown rate: 4% (annual payments)
• Return of 12% per annum
• An inflation rate of 6%

Example 1 (0.86% Fees): Real investment value is approximately R4.7 million.

Example 2 (3% Fees): Real investment value is approximately R2.9 million.

What may seem like only a small difference in fees can have an impact on the potential growth of your living annuity over the long term. This example is for illustrative purposes only, and actual results may vary. You can learn more about the impact of fees on retirement outcomes here.

You will also want to check your Effective Annual Cost (EAC). This is a standardised metric that allows you to see the total costs that come with owning an investment product over a one-year period of time. All else being equal, you may see that a higher EAC would result in fewer returns being available for reinvestment compared to a lower EAC, which may mean there are more returns available to be reinvested and potentially compound over time. The EAC should be just one factor to consider when comparing service providers. You can find your EAC on your investment statement. This is displayed as a percentage value. Feel free to use the EAC calculator on the 10X website, a free online tool part of our suite of free resources, allowing you to compare and evaluate different costs and service providers.

At 10X, you can expect to find fees that are simple, transparent and low cost. The fees that are charged on retirement products are usually 1% or less. This will depend on the product selected and the amount invested. Please explore our products for the most up-to-date fee information. Fee information is correct as of 8 June 2026. H2: How 10X supports long-term living annuity investing

At 10X, we focus on long-term investment outcomes for investors, with consistency over time being at the forefront of our offering. You can expect low-cost investing with transparent fees and no hidden costs. Our funds are diversified, so you will have access to a range of different asset classes, allowing you to balance both risk and return in your portfolio. We use an index-tracking investment strategy, which allows us to be more cost-effective in the fees we charge. We also like to include a more active approach to asset allocation.

At 10X, we understand that a living annuity is a long-term investment that may need to provide you with an income for several decades. As such, our focus is on helping investors build sustainable retirement income strategies through diversified portfolios, appropriate asset allocation, and cost-effective investing. We keep fees low and follow a disciplined investment approach, aiming to leave more of your returns available for reinvestment and potential long-term growth, thereby supporting your living annuity’s sustainability. Feel free to read this article if you would like to find out more about our investment approach.

Practical ways to stay invested for the long term

To successfully manage a sustainable living annuity, you’ll need a long-term mindset and a focus on the factors within your control. Let’s look at a few practical steps that you can implement to help your living annuity in the long term:

• Keep fees low and transparent: Higher fees can reduce the returns available for reinvestment and potential compounding. Over a retirement that might end up spanning several decades, keeping fees low can make a meaningful difference.
• Choose a sustainable drawdown rate: Your drawdown rate plays a major role in determining how long your capital might last. A drawdown rate of around 4% is generally considered sustainable, but the right choice will depend on your personal circumstances and income needs.
• Review your living annuity annually: An annual review can help you make sure that your living annuity stays aligned with your changing needs and circumstances. It’s here where you should assess your drawdown rate, asset allocation, fees, and retirement goals.
• Avoid reacting to short-term market volatility: Remember, market fluctuations are a normal part of investing. Making emotional decisions during periods of uncertainty can negatively affect retirement outcomes.
• Maintain an appropriate asset allocation: A well-diversified portfolio with sufficient exposure to growth assets may help your capital continue to grow while balancing risk and supporting your long-term income needs.

By focusing on these factors, you may improve the longevity of your living annuity and increase the likelihood that it will continue to provide a sustainable income throughout your retirement years.

Managing a living annuity is a new investment chapter

Your retirement is not the end of your investing journey. You will still have your living annuity, which needs to be carefully and strategically managed through your retirement years to ensure sustainability. Your living annuity may span 30 years or more, so this should be a central focus of your retirement plan. Key factors such as your fees, asset allocation, a sustainable drawdown rate and a disciplined and consistent approach to your investing behaviour can help set you on the right track for your retirement years.

The 10X investment consultants are waiting in the wings if you need help with your living annuity planning and management. Get in touch today to learn more about our living annuity funds!