Future-proof retirement income against longevity risk

Longevity risk — the risk of outliving your money - is one of the most underestimated challenges in retirement planning.

- Bongani Msimango

Most people know that life expectancy is increasing, but almost nobody believes they will be the one who lives into extreme old age. Yet about 10% of women will get to 100 and about 10% of men are likely to live to at least 95.

Longevity risk isn’t about planning for the average outcome; it’s about preparing for the possibility that you live much longer than expected.

Five principles are especially important when it comes to managing longevity risk effectively.

1. Master tax-efficient investment vehicles

Tax efficiency plays a critical role in retirement success, yet it is often overlooked. Every rand lost to unnecessary tax is capital that no longer compounds for your future. Over a retirement that may last 25-30 years, this tax drag can significantly increase your withdrawal to accommodate tax.

Before retirement, it is essential to understand which investment vehicles offer tax advantages and how to use them properly.