Living annuities are designed to produce sufficient income for you during your retirement to enable you to continue living in the manner to which you have become accustomed, to maintain this level of income up until your death and to provide long term growth.
The key to achieving these aims is to carefully calculate the asset allocations for your needs. It is often best to consult a financial adviser to help you determine the asset allocations for your living annuity.
Asset allocation deals with both the long term investment side as well as the amount of risk you are willing to accept and balancing the growth to achieve the lowest possible risk with the highest possible returns within a risk band that you are comfortable with.
Annuities are long term investments and hence you need to look at the various investment considerations from a long term perfomance point of view, it is not wise to look at the best performing investments over a short period when you are investing for the longer term. Investments will perform better in some years and worse in some years, it is the long term performance of an investment that needs to be considered in this instance and the longer the period you have to evaluate, the better.
An important consideration when structuring your living annuity is to consider the amount to draw doen every year. You are able to draw down a percentage based on the performance of the fund or a fixed amount adjusted annually for inflation.
The very nature of long term investments like this is that certain years the fund will perform better than the percentage that you draw down and in other years worse, the nett effect being that the years that it has out performed your draw down will supplement the years that it underperforms your draw down.
The most important consideration is to ensure that your living annuity lasts long enough to see you through to your death and does not run out leaving you dependent on family, friends or the State.
It is highly recommended to consult a financial adviser if you are not very well informed on the numerous asset classes and investment options. Perhaps you have already received financial advise regarding the structuring of your living annuity or simply want to get more information about living annuities, we are here to help and advice is completely free.