Preparing for retirement
Your savings now sit in several places: retirement funds, investments in your own name, perhaps money offshore. The years around retirement decide how they become one dependable income, how much tax you pay on the way out, and what your family receives. This page sets out those decisions in plain language.
What is the retirement age in South Africa?
There is no single retirement age set by law for everyone. For pension and provident funds, your fund's rules and your type of work set the normal retirement age. For a retirement annuity, you can retire from age 55. What matters more than the date is whether your capital can pay the income you want, tax-efficiently, for as long as you need it.
In short
You have built substantial savings over a career or a business: one or more retirement annuities or a pension or provident fund, a portfolio of unit trusts or shares in your own name, perhaps an endowment, property or money offshore. You are within about ten years of retirement, or recently retired, and the question is no longer whether you have enough. It is how to turn it all into a dependable income, keep the tax down, and leave your estate in order.
It is also for people facing one large decision now: an early-retirement or retrenchment package, the sale of a business or property, an inheritance, or the choice between a living and a life annuity.
Yes. Each retirement annuity is a separate contract, so from age 55 you can retire from one and leave the others invested until you need them. That lets you match the income you start drawing to what you actually need, and keep the rest growing.
Usually in the order that costs the least tax over your whole retirement, not just this year. Income from a living annuity is taxed in full at your marginal rate, while withdrawals from investments in your own name are mostly a return of your own capital, with only the gain taxed under capital gains rules. The worked example below shows the difference.
There is no single right figure: it depends on where you will spend your money and what else you own. The rules set the limits. Inside a retirement annuity or preservation fund, Regulation 28 caps offshore at 45%. A living annuity is not bound by Regulation 28, although providers can set their own limits. Money in your own name can go offshore under the annual allowances.
Start from the income you want, not a target number. The table below shows what R5 million, R10 million and R20 million give at different drawdown rates. Your answer depends on your other income, your tax, inflation and how long the money has to last.
List every fund and investment you hold, including endowments, property and anything offshore, with its value, its rules and who the beneficiaries are. Most costly retirement decisions come from deciding about one fund without seeing the others.
Estate duty has to be paid before your heirs receive assets, so the estate needs cash. Retirement fund and living annuity benefits paid to nominated beneficiaries generally fall outside the dutiable estate, while investments, property and offshore assets in your own name are included. Deciding in advance which assets fund the duty avoids forced sales at a bad time.
A living annuity lets you choose an income between 2.5% and 17.5% of its value each year. The table shows the first-year income at three common rates. It is simple arithmetic, before tax and fees, and not a projection: the right rate depends on your age, your other income and how your investments perform.
| Capital | 4% a year | 5% a year | 6% a year |
|---|---|---|---|
| R5 million | R16 667 a month | R20 833 a month | R25 000 a month |
| R10 million | R33 333 a month | R41 667 a month | R50 000 a month |
| R20 million | R66 667 a month | R83 333 a month | R100 000 a month |
Drawing too much in the early years is the most common way a retirement income runs short. A higher rate is not wrong, but it needs a plan for what happens if markets fall in the first few years.
The money that must buy an annuity at retirement can go into a living annuity, a life annuity, or a mix of the two. They solve different problems, and many people use both.
| Living annuity | Life annuity | |
|---|---|---|
| Income | You choose 2.5% to 17.5% of the value each year and can change it once a year | A fixed or increasing amount, paid for as long as you live |
| Investment risk | Yours: income depends on how the investments perform | The insurer's |
| Running out | Possible if you draw too much or markets fall early | Not possible: income is paid for life |
| On death | The remaining value goes to your beneficiaries | Income usually stops, unless you chose a guarantee period or a joint life annuity |
| Flexibility | High: you pick the funds and the rate | Low: terms are set when you buy it |
A living annuity suits people who want control and are able to carry investment risk; a life annuity suits people who want certainty. Combining them can give a guaranteed base income with flexible growth on top. See living annuity vs life annuity for more detail.
Cash taken at retirement is taxed on its own table, separate from your income tax. SARS adds together every retirement and withdrawal lump sum you have received since October 2007, so an earlier withdrawal reduces the tax-free portion you have left.
| Total lump sums | Tax |
|---|---|
| R0 to R550 000 | 0% |
| R550 001 to R770 000 | 18% of the amount above R550 000 |
| R770 001 to R1 155 000 | R39 600 + 27% of the amount above R770 000 |
| R1 155 001 and above | R143 550 + 36% of the amount above R1 155 000 |
Cash in hand is not always the best choice. Money left in an annuity is taxed only as you draw it, and in a living annuity it grows free of tax inside the product.
Example: a 66-year-old wants R1 million a year before tax, from a living annuity and a portfolio of unit trusts held in their own name. The only difference between the two columns is where the money comes from.
| All from the living annuity | Living annuity plus own investments | |
|---|---|---|
| Drawn from the living annuity | R1 000 000 | R600 000 |
| Withdrawn from own investments | R0 | R400 000, of which R150 000 is gain |
| Taxable capital gain | R0 | R40 000 (R150 000 less the R50 000 exclusion, x 40%) |
| Income tax for the year | R278 528 | R137 542 |
Retirement is a good moment to update your will and your beneficiary nominations, because the way your assets are held changes. Estate duty is charged on the dutiable value of an estate after an abatement of R3.5 million: at 20% on the first R30 million and 25% above that. For example, an estate with a net value of R20 million has a dutiable value of R16.5 million and estate duty of R3.3 million, before any other deductions the Estate Duty Act allows.
Two practical points: retirement funds pass under the fund's rules and your nominations, not under your will; and an estate needs cash to pay duty, fees and debts without selling assets at a bad time.
How I Work
Good financial planning starts with understanding your circumstances, priorities and what you want to achieve.
My approach is to consider your financial position as a whole, rather than looking at investments, retirement income, tax and estate planning decisions in isolation.
I aim to provide objective, practical advice that helps you understand your options, make informed decisions and put an appropriate strategy in place. The focus is on adding meaningful value, not introducing unnecessary complexity or recommending changes simply for the sake of change.
Advice that considers how your investment, retirement, tax and estate planning decisions fit together.
Recommendations based on your circumstances and goals, including retaining existing arrangements where these remain appropriate.
Regular reviews and adjustments as your circumstances, needs and financial priorities change.
We discuss your circumstances, objectives and priorities, and identify the areas where advice may add value.
I review your existing arrangements, assess relevant options and prepare recommendations tailored to your circumstances.
We discuss the recommendations, agree on the appropriate actions and implement any changes where necessary.
We review your strategy over time and adjust it as your circumstances, objectives and needs evolve.
Sometimes the best advice is to retain what you already have. Where your current arrangements are appropriate, I will explain why, rather than recommend changes that offer little or no meaningful benefit.
For retirement, that means one plan across all your funds and investments, with the income, tax and estate decisions made together rather than one product at a time.
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What to check and decide at each stage, on one page.
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There is no single retirement age set by law for everyone. For pension and provident funds, SARS notes that the fund's rules and the member's line of work determine the normal retirement age, so your fund rules and employment contract are the place to check. Retirement annuities are different: you cannot retire from an RA before age 55, but you may choose to retire from it later.
Often, yes. Employer funds set their own early-retirement rules, so check yours, and you can retire from a retirement annuity from age 55. The real question is whether your capital can support a longer retirement. Retiring five years early means five fewer years of contributions and five more years of income, so test the income plan before you accept an early-retirement offer.
It depends on the income you need and your other sources of income. As simple arithmetic, R10 million in a living annuity drawing 4% gives about R33 333 a month before tax and fees, and 5% gives about R41 667. Whether that lasts depends on investment returns, inflation and how long you live, so the drawdown rate should be reviewed every year.
Yes, above a tax-free amount. For the 2026/27 tax year the first R550 000 of retirement lump sums is tax-free, then rates of 18%, 27% and 36% apply. SARS adds together all retirement and withdrawal lump sums you have received since October 2007, so earlier withdrawals reduce what is left of the tax-free portion.
The law lets you draw between 2.5% and 17.5% of the value each year. A sustainable rate is usually well below the maximum, and the right figure depends on your age, your other income and your investments. Drawing too much in the first years, especially after a market fall, is the most common way a retirement income runs short.
Deciding about one fund without seeing the whole picture; drawing from the most heavily taxed pot first; taking more cash than you need and paying tax you could have deferred; choosing a drawdown rate the capital cannot sustain; and leaving beneficiary nominations and a will out of date. Each is avoidable with a plan made before the retirement date, rather than on it.
Take only the cash you have a use for. The first R550 000 of retirement lump sums is tax-free over your lifetime (2026/27), and the rest is taxed at up to 36%. Money left in a living annuity is taxed only as you draw it, grows free of tax inside the product, and generally passes to your beneficiaries outside your estate. Cash that then sits in a bank account is often the costliest choice.
Rules and figures on this page were checked against these official sources on 9 October 2026.
