Annual income within the 2.5% to 17.5% band and how long capital lasts.
Net annual income
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Gross income
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PAYE
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Capital lasts
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The trade-off at the heart of a living annuity
When you retire with a living annuity, you keep control of your capital and choose how much income to draw each year, within a band the law fixes. That freedom is also the danger. Draw too much and you hollow out the capital while you are still alive; draw too little and you live more frugally than you needed to. This calculator makes the trade-off visible by showing the income a given drawdown produces, the PAYE it attracts, and roughly how long the capital is likely to last at your chosen growth rate. It is built for people at or near retirement deciding what percentage to set, and for anyone modelling whether their pot can sustain the lifestyle they want.
The drawdown is bounded. By law you must withdraw between 2.5 percent and 17.5 percent of the residual capital each year, the band this calculator applies, and you can change the rate once a year on the policy anniversary. If you enter a figure outside the band, the tool clamps it back to the legal range and tells you. Confirm the current band with your administrator or the FSCA, since these limits are set by regulation.
R3 million at a 5 percent draw
Take R3,000,000 of capital, a 5 percent drawdown, 8 percent expected growth, and a retiree aged 65 to 74. Five percent of R3 million is R150,000 of gross income for the year. Run through the SARS tables with the age-65 rebate this calculator applies, the tax is only about R321, because R150,000 sits just above the higher tax threshold for over-65s, so almost all of it falls in the lowest band after the rebate. Net income is about R149,679. And because the 8 percent growth comfortably exceeds the 5 percent draw, the capital is not being eroded at all, so the longevity model returns 60+ years.
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The chart shows this year's income split between net income and PAYE.
Why a high drawdown is a slow leak
The longevity figure is the most important output and the least intuitive. As long as your growth rate beats your drawdown rate, the capital holds or even grows, which is why the 5 percent example never runs dry. Flip it: draw more than you earn in growth, and each year you withdraw a fixed rand amount from a shrinking balance, so the percentage you are pulling out silently climbs even though the rate on paper looks the same. That is how a 17.5 percent maximum draw can drain a pot in well under a decade in a poor market. The model here assumes a level nominal income and a steady growth rate, which smooths over real-world market swings, so treat the years as a guide, not a promise. A run of bad early returns, what advisers call sequence-of-returns risk, can do far more damage than the average suggests.
A practical retirement tactic: many advisers suggest starting near 4 to 5 percent and only lifting the draw if the capital is clearly outpacing it, keeping a cash buffer of a year or two of income so you never have to sell growth assets in a downturn to fund the withdrawal. Remember too that the income is fully taxed as normal income through PAYE at your marginal rate, so a bigger gross draw not only erodes capital faster but can also nudge you into a higher tax band. The tax figures here follow the rates this calculator applies and should be confirmed with SARS.
Can I switch a living annuity to a guaranteed annuity later?
Yes, you can convert a living annuity to a guaranteed life annuity, which pays a fixed income for life and removes the longevity risk, but the move is generally one way and the income then depends on rates at the time you switch. Some retirees blend both, using a guaranteed annuity for essential expenses and a living annuity for flexibility.
What happens to the capital when I die?
Unlike a guaranteed annuity, a living annuity's residual capital passes to your nominated beneficiaries. They can take it as a lump sum, taxed under the retirement lump-sum table, continue the annuity, or combine the two. This is a key reason people choose a living annuity over a life annuity, where the capital is usually lost on death.
How often can I change my drawdown rate?
Once a year, on the anniversary of the policy, you may reset the percentage anywhere within the 2.5 percent to 17.5 percent band. You cannot change it mid-year, so set it with the coming twelve months in mind, balancing the income you need against preserving capital for the years ahead.