Retirement in the time of COVID-19 – How to secure a sustainable income for life

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Living annuities has become the product of choice when it comes to retirement for most advisers. The Coronavirus has shattered the myth that there is no place for the guaranteed annuities we have been publishing for the past 20 years.

Retirement in the time of COVID-19 sees pensioners facing not only the risk of contracting the coronavirus, but also the risk of not having an income that can sustain them for life, due to the current environment that has seen investment market crashes, reducing retirement savings substantially. Should market conditions persist for the next 12 months, retirement income specialist Just believes that pensioners may run out of money four years earlier than under normal investment conditions.

In a recent article CEO Deane Moore looks at some sensible steps that pensioners can take to protect their income. One of the steps is to think about retirement savings in two pots where the first pot should ensure you have enough sustainable income to cover your essential expenses for life; and the second pot is for discretionary spending or to leave as a legacy.

The other step is to secure your income for life. “The only way to secure the first pot with certainty is with a life annuity or by switching a portion of your assets in your living annuity to a lifetime income portfolio in your living annuity,” Moore remarks.

According to Moore the good news is that the cost of purchasing a guaranteed income for life has gone down by almost as much as the fall in value of balanced portfolios. That means that a pensioner can secure broadly the same guaranteed income for life today as they were able to do before the market crash.

The important aspect is that pensioners and all your clients’ should be informed about all the options available, the pros and the cons – Now is the time to connect with them and guide them appropriately.

Download the Just article for more information, and share with your clients if you wish.

In a separate interview Ryk van Niekerk of Moneyweb speaks to Jaco van Tonder, director of advisory services at the asset management firm Ninety One, about the impact of Covid-19 on pensioners, especially pensioners who are dependent on living annuities for income.

We also wish to extend our thanks and admiration to Moonstone’s two Investment Indicator compilers, Anton van Rooyen and Ezra Smith who manage to obtain all this data under extremely trying conditions. They have to contact all product provider contacts (working from home) during Monday mornings to obtain the relevant information, process it, and cross check for accuracy. Well done guys. We are proud to be associated with you