A living annuity is a financial product you buy post retirement with the saved up money you have in your retirement annuity/pension fund.
A living annuity is an investment product and you are exposed to market risk. You can change the rate of withdrawal out of the policy between 2.5% and 17.5% per year, and you can choose to receive the income monthly, quarterly, half yearly or yearly. You cannot make lumpsum withdrawals out of the policy. You can nominate a beneficiary on the policy and this person will receive the fund value at the time of your death. This fund value will depend on your withdrawals and market growth you had on the policy.
The benefit of this type of policy is that you can bequeath capital to a family member, but you carry the risk that you might outlive your capital. You also need a large sum of money to invest in order to keep your withdrawal rate low and preserve capital to outperform inflation. In an ideal world, you would want to be able to have a guaranteed annuity and a living annuity. In order to be able to do that, you would have to save for many years consistently. In order to manage the risk of outliving your capital, a guaranteed annuity is the ideal solution and that will be dealt with in another post.
Start early with retirement saving and prioritize it in your budget. Do not stop your contributions unless you have absolutely no other choice.
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