After years of saving for retirement, investors and their financial advisers are faced with one of the most important retirement planning questions – “what is the maximum I can draw from my investment portfolio to ensure I do not run out of money?” Most of the research around this question states that the answer to this question lies in accurately determining your initial withdrawal rate, which is defined as the Rand amount withdrawn divided by your investment portfolio value, and how you increase your income year on year. In a high return environment, like we have seen in South Africa over the past 20 years, there has been less focus on the initial withdrawal rate as investment returns have generally been more than the income drawn. However, we currently find ourselves in a low return environment which has caused some anxiety amongst investors as they are starting to see their annual income exceeding the investment returns.
Adapting Living Annuity Drawdown rates in a low – return environment
