Retirement Annuity vs Living Annuity Explained

At retirement you choose how to draw

Up to one-third of retirement fund proceeds may typically be taken as a lump sum (taxed on the retirement lump-sum table); at least two-thirds must provide a retirement income. The income vehicle is usually a living annuity (LA) or guaranteed life annuity (GLA).

LA offers flexible draw rates and beneficiary continuation but investment and longevity risk sit with you. GLA transfers longevity risk to the insurer at the cost of flexibility.

Living annuity draw rates

Regulations prescribe minimum and maximum draw percentages of LA capital. Too high a draw depletes capital; too low sacrifices lifestyle. Review draw rate annually against performance and age.

Sequence-of-returns risk in the first five years of retirement can permanently impair capital — hold a cash bucket for draws during downturns.

Blend strategies

Many retirees use GLA for essential expenses floor and LA for discretionary spending. Model both in MyGenie before you sign irrevocable annuity papers.

This article is illustrative and educational. It is not financial, tax, or legal advice. Figures are examples only — model your own situation in MyGenie or speak to a licensed financial adviser.