Insights studio
How Long Will Your Living Annuity Last in Retirement?
How long will your living annuity last? Learn the drawdown rates, fees and return assumptions that decide whether your retirement income survives 30 years.
AS Brokers insight · Retirement income
How long will your living annuity last?
It is the question that keeps many South African retirees awake: will the money outlast me, or will I outlast the money? The honest answer is that a living annuity does not have a fixed expiry date. How long it lasts is decided by a handful of choices you can understand and, to a large degree, control. This article shows you what those choices are and how to think about them calmly.
The short answer: it depends on you, not the product
There is no single number we can give you. The same living annuity, holding the same amount of capital, can comfortably provide an income for life — or run dry within a decade. The difference is not luck. It is the combination of how much you draw, what your investments earn, and what you pay in fees.
This is the defining feature of a living annuity, and it cuts both ways. Unlike a guaranteed (life) annuity, where an insurer promises you an income for life and carries the risk if you live longer than expected, a living annuity keeps you in control of your capital — which means you also carry the risk. If markets disappoint or you draw too much, there is no insurer standing behind you. That freedom is valuable, but it has to be managed.
The three numbers that decide everything
Strip away the complexity and the lifespan of a living annuity comes down to three levers. Understand these and you understand the whole question.
Lever 1
Your drawdown rate
How much income you take each year, as a percentage of your capital. This is the lever most within your control — and the one most often set too high.
Lever 2
Your investment return
What your underlying portfolio earns after inflation. Returns are not guaranteed and will rise and fall, which is exactly why the next lever matters so much.
Lever 3
Your fees
The quiet third withdrawal. Advice, platform and fund costs come out of your capital every year, whether markets are up or down, and they compound over decades.
The survival equation
Your capital is preserved when the income you draw, plus your fees, stays below your real (after-inflation) return. When drawdown and fees together exceed what your portfolio earns in real terms, your capital begins to erode — slowly at first, then faster.
That single sentence is the heart of the matter. Everything else — the legal rules, the prudent guidelines, the worked examples below — is just a way of applying it to your own situation.
The rules that frame your choices
Within the survival equation, you do not have unlimited freedom. South African regulations set the boundaries, and it helps to know them before you decide anything.
The 2.5% to 17.5% drawdown band
By law, you must draw an income of between 2.5% and 17.5% of your living annuity’s value each year. Draw near the bottom of that band and your capital has the best chance of lasting. Draw near the top and you are, in effect, spending your capital faster than almost any portfolio can replace it. The 17.5% ceiling is sometimes called the “point of ruin” for a reason: once you reach it, you cannot increase your income further, and inflation quietly erodes its purchasing power from there on.
You can change your drawdown once a year
Your drawdown percentage can be adjusted only once a year, on your policy’s anniversary date. This makes that anniversary the single most important date in your retirement calendar. A decision made in haste — or skipped entirely — locks you in for another twelve months. Treat it as a deliberate annual review, not an administrative formality.
What “real” return actually means
A real return is your investment return after inflation. If your portfolio grows 11% but inflation runs at 5%, your real return is roughly 6%. This is the number that matters, because your income needs to keep up with rising prices over a retirement that may span thirty years. A living annuity that merely “makes money” in nominal terms can still be shrinking in real, purchasing-power terms.
The simplest way to see how these levers interact is to model your own numbers. Before reading on, it is worth testing a few scenarios for yourself — how your capital responds to different drawdown rates and returns.
What a sustainable drawdown rate looks like
Industry guidance from the Association for Savings and Investment South Africa (ASISA) offers a useful starting frame. Drawdown rates of roughly 4% to 5% in the first decade of retirement, and below 8% in the later years, are generally considered prudent — giving most retirees a strong chance of preserving their purchasing power for life. These are guidelines, not promises, and your own sustainable number depends on your age, your portfolio and your circumstances.
Encouragingly, South African retirees as a group are drawing fairly responsibly. According to ASISA’s most recent statistics, the average living annuity drawdown rate fell to 5.6% in 2024 — the lowest level since the industry began collecting these figures. But averages hide the danger cases: a meaningful share of retirees, particularly those who reached retirement with too little saved, draw well above 7.5%, where capital tends to erode quickly.
Illustration · same capital, three drawdown rates
Imagine three retirees, each starting with the same capital and the same portfolio. The only difference is how much they draw. This is a simplified illustration based on assumptions, not a forecast — actual outcomes depend on real market returns, which rise and fall.
- Drawing ~4% — below a typical real return in good years. Capital tends to hold its value or grow, and the income has a strong chance of lasting for life and keeping pace with inflation.
- Drawing ~7% — close to the line. In strong markets the capital holds; in weak ones it slips. Sustainability becomes sensitive to timing and fees, and demands regular review.
- Drawing ~10% or more — above almost any sustainable real return. Capital erodes steadily, and ASISA’s own guidance suggests that drawing above 7.5% often leaves less than a decade before reaching the maximum.
“The same living annuity can last twelve years or a lifetime. The product does not decide that. You do — one drawdown decision at a time.”
The two hidden risks that shorten a living annuity’s life
Even a sensible drawdown rate can be undermined by risks that do not show up on a simple spreadsheet. Two in particular deserve your attention, along with the slow pressure of inflation.
Sequence-of-returns risk: when bad markets hit matters more than whether
Two retirees can experience the exact same average return over twenty years and end up in completely different positions — simply because of the order in which good and bad years arrived. A sharp market fall in the first few years of retirement, while you are also drawing an income, forces you to sell more units at low prices. That damage is hard to recover, because there is less capital left to benefit when markets rebound. The same bad year, arriving fifteen years later, does far less harm. This is why the early years of retirement carry disproportionate weight.
Longevity risk: plan for thirty years, not fifteen
Many people quietly plan for an income that lasts ten or fifteen years. Yet a South African retiring at 65 in reasonable health may well need an income into their late eighties or beyond — and in a couple, the odds that at least one partner lives a very long time are higher still. Planning for a shorter retirement than you actually have is one of the most common and costly miscalculations.
Inflation: the slow erosion of purchasing power
If your income does not grow each year, it quietly buys less. Over a long retirement, inflation can halve the real value of a fixed income. A living annuity that looks comfortable today must be stress-tested against the cost of living a decade or two from now.
These risks are easier to grasp visually. The short explainer below walks through how the timing of returns affects a retirement portfolio.
What to do if you suspect you’re drawing too much
If the numbers above made you uneasy, that is useful information, not a verdict. There are practical, measured steps that can extend the life of a living annuity — and most of them are available to you at your next anniversary.
Lower your drawdown — and reinvest any surplus
If you are drawing more than you actually spend, reducing your drawdown at the anniversary leaves more capital working for you. Some retirees discover they are drawing well above their genuine needs out of habit; trimming back, even modestly, can meaningfully change the long-term picture.
Review your fees in Rand terms
Fees are the lever people most often ignore. Ask your provider for your Effective Annual Cost (EAC) and look at the figure in Rands, not just percentages. A cost difference that sounds trivial — one percentage point a year — can quietly consume a large share of your capital over a long retirement, because it compounds against you every single year.
Right-size your investment mix
An income that has to last thirty years generally needs some growth exposure to outpace inflation, balanced against enough stability to weather a bad first few years. The right blend of growth assets, stability and offshore exposure is personal — too cautious and inflation wins; too aggressive and sequence risk bites. This is a decision worth taking advice on rather than guessing.
Consider whether a blended or guaranteed annuity fits
Here is the honest trade-off many retirees are never shown: the flexibility that makes a living annuity attractive is also its failure mode. For some people, partially giving up that control — through a blended annuity that combines a guaranteed income with a living-annuity portion, or a guaranteed annuity for part of their capital — delivers greater certainty that the income will last for life. Less control can, paradoxically, mean a longer-lasting income. It is not the right answer for everyone, but it deserves to be on the table.
What advisers see in practice
In day-to-day retirement planning, a few patterns repeat. Retirees anchor to a comfortable starting income and never revisit it. They panic in a down market and crystallise losses by switching to cash at the worst moment. They underestimate how long retirement actually runs. And they are often surprised, in a good way, by how much difference a single disciplined annual review makes. The retirees who fare best are rarely the ones who picked the perfect fund — they are the ones who reviewed their drawdown honestly, year after year.
What happens if it runs out — and what passes to your family
It is worth being clear-eyed about both outcomes. A living annuity does not guarantee an income, so if drawdown and poor markets erode the capital, the income can fall to very little. There is no insurer to top it up. That is the downside of carrying the risk yourself.
The upside is what happens at death. Any capital remaining in your living annuity passes to the beneficiaries you have nominated. They can usually choose to take it as a lump sum, continue the income, or a combination — and where beneficiaries are properly nominated, the value generally falls outside your deceased estate. This is one of the genuine advantages a living annuity holds over a guaranteed annuity, and a reason the nomination of beneficiaries should be kept up to date.
Both of these realities point to the same habit: the annual review is not optional. It is the mechanism by which you keep the income sustainable for you and the legacy intact for those who follow.
Key takeaways
- A living annuity has no fixed lifespan — its longevity is decided by your drawdown rate, your real return, and your fees.
- Capital survives when drawdown plus fees stays below your after-inflation return.
- Roughly 4–5% in the first decade, and below 8% later, is generally considered prudent; above 7.5% is a warning sign.
- The early years carry outsized weight because of sequence-of-returns risk; plan for thirty years, not fifteen.
- Your once-a-year anniversary review is the single most powerful control you have.
- Market values can rise and fall, and your income is not guaranteed — which is exactly why a modelled, regularly reviewed plan matters.
How an adviser changes the answer
Everything in this article can be read off a website. What a website cannot do is tell you your sustainable number — for your age, your capital, your portfolio and the market you are retiring into. That is the difference between general guidance and a modelled income plan: one lists the rules, the other applies judgement to your circumstances and stress-tests them against a poor run of returns. If reading this raised a question about your own living annuity, that is the conversation worth having before your next anniversary date. Speak to an AS Brokers adviser for a proper review rather than acting on a rule of thumb.
Frequently asked questions
How long will my living annuity last?
It depends on your drawdown rate, investment returns and fees. With a prudent drawdown it can provide an income for life; with a high drawdown it can be depleted within years.
What is a safe drawdown rate on a living annuity in South Africa?
As a general guideline, around 4–5% in the first decade of retirement and below 8% in later years is considered prudent. Your own sustainable rate depends on your age, portfolio and circumstances.
Can I actually run out of money in a living annuity?
Yes. A living annuity does not guarantee an income, so capital can be exhausted if drawdown is too high or returns are poor over time.
What is the minimum and maximum I can draw?
Between 2.5% and 17.5% of the value of your living annuity each year.
How often can I change my drawdown rate?
Once a year, on your policy’s anniversary date.
What happens to my living annuity when I die?
Any remaining capital passes to your nominated beneficiaries, who can typically take a lump sum, continue the income, or both. Where beneficiaries are nominated, it generally falls outside the deceased estate.
About AS Brokers
AS Brokers helps South African retirees, business owners and families make better long-term financial decisions through retirement planning, investments, risk management, estate planning and business assurance. Our focus is on the decisions that shape your financial future — create wealth, protect wealth, preserve wealth — rather than products alone.
This article is general educational information and does not constitute personalised financial, tax or legal advice. Investment values can rise and fall, and past performance is not a guide to future returns. The figures and guidelines referenced reflect publicly available information at the time of writing and may change. Before making any decision about your living annuity, speak to an AS Brokers adviser for a review based on your own circumstances. AS Brokers CC is an authorised financial services provider, FSP 17273.