Living Annuity Masterclass: How to make smarter retirement income decisions

Retirement income can feel like one of the biggest financial decisions you will ever make. Once you retire, your savings need to do two jobs at once: give you an income today and last for as long as possible. That is why understanding the difference between a living annuity and a guaranteed life annuity matters.

In this masterclass, Simon Brown and Michael Rossouw from 10X Investments unpacked the big retirement income questions in plain language: how living annuities work, how much you can draw, why fees matter, what happens when markets are volatile, and how your choices affect your spouse, children and beneficiaries. The key takeaway was simple: there is no one-size-fits-all answer, but there are better questions investors can ask before making a decision.

Key moments from the masterclass

One of the most helpful parts of the discussion was the three-stage framework for retirement income planning. Before worrying about returns, investors first need to understand which vehicle suits their needs: a living annuity, a guaranteed life annuity, a blend of the two, or a mix that includes non-retirement savings. Only after that does it make sense to look at the underlying investments, such as cash, bonds, property, shares and offshore exposure. The final step is making sure you keep as much of the return as possible by managing costs and tax.

Living annuity or guaranteed income?

The comparison between living annuities and guaranteed life annuities was another important moment. A living annuity keeps your capital invested in the market and gives you flexibility, including the ability to leave remaining capital to beneficiaries. A guaranteed life annuity gives you certainty of income, but you usually give up ownership of the capital. The masterclass made it clear that the higher income sometimes quoted on guaranteed annuities needs to be understood properly, because every added benefit, such as inflation protection, spouse cover or capital protection, can reduce the starting income.

Fees can have a big impact on your final retirement amount

Fees were one of the strongest themes in the session. Michael explained that investors can easily be misled when they ask for “total fees”, because that phrase can be interpreted in different ways. The more useful term is Effective Annual Cost, or EAC, because it includes both direct and indirect costs. This matters because a fund fact sheet may show returns after investment management fees, but not necessarily after admin, advice or other direct costs. In retirement, even a small fee difference can have a meaningful impact over time.

Your drawdown needs to match your investment

The drawdown conversation was especially practical. While many people talk about a “safe” drawdown rate, the session showed why this is more complicated in real life. Your income needs to be weighed against inflation, fees and the expected return of your portfolio. If those three numbers do not line up, your capital may start eroding faster than expected. This is why a lower-risk portfolio is not always safer if it cannot generate enough growth to support your income needs.

Don't let scary headlines drive long-term decisions

The final key theme was investor behaviour during uncertainty. Markets will always have scary moments, from wars to inflation shocks to political events. The danger is making a short-term decision with long-term retirement money. The message was not to ignore risk, but to zoom out, understand your asset allocation, diversify properly and avoid becoming a “prisoner of the moment”. For anyone living off their retirement savings, that perspective can be just as important as the investment itself.

If you want to talk all these big decisions through with someone, our consultants will run the numbers with you. No fee, no pressure. Book a call here.