Living annuity balance: How to draw an income without draining your capital

Marius Fenwick of WealthUp discusses the risk factors contributing to capital depletion and how investors can mitigate these.

You can also listen to this podcast on iono.fm here.

In this episode of the Money Rules Podcast, I’m joined by Marius Fenwick, a certified financial planner at WealthUp, to discuss the complexities of ensuring a sustainable income from living annuities.

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We explore how market volatility, inflation, and offshore exposure impact the drawdown rates from living annuities, with Fenwick highlighting the global standard of a 4% drawdown rate and its relevance in South Africa. He also discusses key risks like capital depletion, investing too conservatively, and the importance of inflation-beating returns.

Fenwick also shares practical strategies for reducing these risks, including managing income escalation, structuring portfolios, creating an ‘income pot’, and the importance of long-term planning.

Read:
The two realities that destroy wealth during retirement
Living annuities: How to tackle the offshore investment conundrum

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ADVISOR PROFILE

Marius Fenwick

WealthUp (Pty) Ltd

AUTHOR PROFILE

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This is a fantastic, most helpful Money Rules Podcast! Thank you, Marius and Boitumelo. I feel much more equipped to make the right decisions en route to retirement.

My wife and I are retired (i.e. stopped earning salaries) 8 years ago and since we don’t enjoy pensions our retirement is self funded, principally from fixed deposits which are fed from our equity.
I do have two small RAs with a total value of R600k – I regret not contributing more to RAs in the past. I set the draw-down to 4% about 5 years ago and while it only pays out ca. R1700,00 pm both funds continue growing!. So set your draw-down to ca. 4% if you can, it’s a good target.

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