Hybrid annuities represent an innovative way to balance security and growth in retirement income planning. Especially for retirees who have seen volatile markets and worry about outliving their money, these products offer a reassuring middle ground. By combining a life annuity’s guaranteed lifetime pension with a living annuity’s investment flexibility, a hybrid annuity can provide both peace of mind and opportunity. You get a safety net of income that you cannot outlive, plus the freedom to invest part of your savings for extra growth and legacy purposes.
In practice, a hybrid annuity lets you cover your essential expenses with a guaranteed paycheck and still have a pool of invested money for discretionary spending and emergencies. It’s about tailoring your retirement plan to have a bit of certainty and a bit of flexibility. As with any financial product, there are pros and cons to consider. Make sure you understand the costs, the conditions, and the implications for your heirs. South Africa’s market for hybrid annuities has grown, with reputable insurers and investment firms offering options to suit different needs. If used correctly, this approach can greatly improve the sustainability of your retirement income and reduce the stress of market ups and downs.
It’s recommended to get independent financial advice to see projections for different annuity mixes. A qualified advisor can help determine the right balance (or whether to go hybrid at all) based on your longevity outlook, required income, and desire to leave an inheritance.
* Marise Reinach, CFP®, is head of Brenthurst Wealth Pretoria.
