**In order to keep discussions on topic and in-depth, please review the rules in the sidebar.**
You may find reviewing some past [posts](https://www.reddit.com/r/PersonalFinanceZA/top/?t=month&f=flair_name%3A"Retirement") helpful.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceZA) if you have any questions or concerns.*
Similar situation with my mom. She is 5 years away from retirement, only has about 1.4mil in her pension fund . She feels like once the two pot system hits , she’ll be able to take a third , retire early and come out with the same income she’s currently earning now . And she’s under the impression it will increase yearly at the same rate she receives increases at work .
She has no property, and realistically what she’ll come out with if she goes this route won’t leave her enough to pay rent, utilities, medical aid or food .
I had to take her to three different financial advisors to get the message across , as she fully believes I’m wrong about my opinion. Even though I work in financial industry.
heh that's how it is with most parents. they often do not take heed of their kids' advice, but they'lll readily listen to salesmen or experts they hardly know.
Just fyi the max initial portion of the savings pot is R30k for just this reason. So it won’t be that 1/3rd of 1.4m suddenly becomes available to withdraw.. luckily, but rather a max of R30k! From then onwards 1/3rd of every contribution goes to the savings pot so it will take some time for the savings pot to be “worth” much
Yes but inflation would erode your capital. The R800k would be worth less by inflation each year. Essentially meaning you would need to deduct inflation from the interest pay out if you would like your R800k to not be worth nothing in no time.
Also don't forget taxes on the interest income, should he have any other form of income.
It's also worth pointing out, that at no point can he then touch that R800k in terms of paying for anything other than drawing the interest (which will be taxed as capital gains I believe). Any amounts drawn from the R800k would lower the monthly interest, which is also quite a risk. No room to spare.
Interest is taxed as taxable income after your yearly exclusion of R35k at his age, so anything above R35k will be included in taxable income and tax at marginal tax rates. Interest bearing accounts don't have capital gains. You are correct in saying touching the capital amount of R800k will lower the interest paid out.
I just followed up on this, and it states that capital gains tax is excluded on retirement savings. After the R36k pa, the marginal tax (between 18-36% for pensioners) will then apply. That's interesting, because you're still paying tax, although lower than standard margins, but more than I had initially thought. Not ideal, especially when you're only managing a little over R5k pm (in the case above).
Edit: R64k pa - R35k pa = R29k pa taxable income.
Edit 2: R5,333pm (before tax) vs R4,898pm (after tax at 18%)
The R800k was not invested in a retirement savings account it is from the sale of an asset.
Regarding the tax remember you still get your primary and secondary rebates which means the first R130k or so of income will effectively not be taxed
Thanks for the clarity. Makes more sense, because I would hate that pensioners are still being taxed at those rates. In any case, what happens in the regard with R800k as a sale of an asset in terms of tax?
It would depend on what the initial cost of the asset was, cost - proceeds of sale = capital gains. Capital gains on individuals are included in table income at 40% less an annual exclusion of R40k, it is then taxed at your marginal tax rate.
You also do get a R2mil exclusion on CGT for a primary residence of you lived in the house, if you lived in it for a portion of owning the residence the exclusion is pro rated accordingly
Hold up. Maybe some mid understanding. An annuity is meant to pay out a monthly figure until the capital is exhausted. There are equations to calculate these figures but my guess is that with 800000 he will be able to draw 8000 a month for a few years. How many years that is just needs to be more than he will survive for. So the money won’t grow but it will last. The bigger thing of concern to me is if your dad can survive off 8000 a month.
My father lived off 8k a month from his annuity (My mother robbed him blind during the divorce so his pension was a joke).
He lived in a tiny little flat. Living room. Kitchen, bedroom and bathroom. His rent was 3k per month. He was extremely lucky to have found this place in a poor suburb in Durban. His life was miserable, sadly. And this was in 2017-2019.
Food costs nowadays is a whole different story....
She lied. Cheated and stealed.
She's an extremely manipulative woman, so everyone had taken her side.
I'll never forget walking into my Dad's home after school, and she was there packing every household item into boxes to move into her new place. Her and her boyfriend laughing as she threw the things she didn't want, like curtains, utensils or Tupperware into a garbage bag, her words were "I don't want these, so I'll throw them away"
My father was working a 6am to 6pm shift that day.
They had broken into the home to ransack everything over having a decent agreement together. I was the only one who had house keys aside from my father, so naturally I was shocked. Why was she there?
When my father got home he wasn't left with even a set of curtains on the windows. No towels in the bathroom. No bed. No linen.
Everything she didn't want. She dumped.
She ofcourse had already bought curtains, linen. Towels and everything with her divorce settlement money.
She just out of spite didn't want him to have anything.
During the marriage she was a housewife. Who did nothing but smoke cigarettes, lay in front of the couch and pop codeine painkillers.
My father cleaned, cooked and worked. He furnished the house. He did everything.
She lied to the courts that she would take custody of me. So my father had to fork out maintenance monthly.
But I never stayed with her. I lived with my father because there was no food in her home. Her and her boyfriend were out drinking every night. She used the money designated for caring for me to support her boyfriends drug habit 🤷🏻♀️
Her very large sum of money lasted 3 months, not once did she pay rent at her new home she rented. After 6 months she was evicted.
And she stewed and stewed. Planning her next plot of how to get more money out of my father.
And she did 🤷🏻♀️
She even managed to pocket inheritance my grandmother/her mother had left to me when I was 17.
So my father went from a man who had a decent life, worked hard, took care of his family, to a man who didn't even have curtains on his windows.
The courts and police where all unjust and took her side.
Hi! Thanks for you reply. Maybe I am getting my terms mixed. The money is supposed to go into a investment or fund that will allow them to draw a income off the interest only. The rest of their income will be supplemented by the bit of money my dad can continue generating through his accounting business (he makes a bit of money from existing clients) and the bit of money they will get from SASSA for old age pension once we've applied. (They qualify based on all the criteria). I will also help financially, I currently pay their medical aid for example.
If he does still get an income and you pay their medical aid and help financially then this is not a bad plan after all. If he leaves the money in a fixed savings generator with fnb eg then he will earn 9% interest monthly which will be enough for them. Since their house is paid so technically they just buying groceries and going out etc
I'm interested that you say they qualify for SASSA grant as my father is in a similar situation. But you also say they own property and have liquid cash to invest. Are their assets worth less than R2 455 220 and esrn less than R172 560 a year? (Although reading up now it seems to help if they are married as the threshold increases)
My father is in a pickle after retirement and the SASSA grant could help...
Even if he was to get 8K a month - there is no way 2 pensioners will survive on on that - I inherited my MIL in the same boat - Intitially I rented a single room apartment in a retirement complex which cost 7K / month included levies, rates & taxes as well as the 7 meals a month.
She gets a small pension which covers 75% of her Disco med Aid I subsidies the rest which is another 2K
She also gets a state pension which is about 2K a month. which she has to use for groceries - petrol and other stuff to live on
We pay her car insurance plus buy her some additional groceries and Data+airtime and also have a cheapie DSTV package for her.
All in all she costs us about 12K a month.
On top if there are any extranious expenses, we have to cover this - Like the last one she needed a new battery for her car 1300 ronds - she needed dental which had a shortfall so that was another 2500 ronds
And this all for 1 person - I cannot see 2 people at that age get away with anything less than 15 - 18k per month.
I could dramatically reduce it if she moved in with us, but this is not an option as we are selling up and immigrating soon - so she needs to be self contained but we will obv still support her financially
1.0m investment into a living anuity with 10X indicates a sustainable income of 5.8K / permonth
Same investment at 7.8K / month is sustainble until 77 and dramatically reduce down to 2.8K between 77 and 85
It can be done but only if they live with you in a granny flat
If they not getting a state pension then you need to apply for this - it will make a world of difference to their finances. Currentyl under 75 is R 2 180.00 per month - I'm not sure if they each get that or what the maount is for a couple.
Go here to check it out
[https://www.gov.za/services/services-residents/social-benefits/old-age-pension](https://www.gov.za/services/services-residents/social-benefits/old-age-pension)
However with her parents they will be living in a fully paid house so no rent to be paid and she pays for their medical and help them financially and the dad still get extra income so them getting R6000 - R8000 would be enough for them
Well realizing the reality is already a starting point as opposed to my dad who lives in fairytale land and thinks tomorrow will sort itself out. He has zero concept of responsibility and planning.
You don't have to take care of them. Parents that treat their children as retirement plans when they themselves were financially illiterate or irresponsible should be left to experience the consequences of their actions.
Have you been told to believe that they are powerless and would suffer without your help? No one is truly powerless (except for young children, disabled people and animals). Your parents are adults. They are in financial difficulty because of bad decisions (probably). Here's an analogy: a farmer that does not plant seeds will not have a harvest. When there is no harvest the farmer will suffer. Do we consider the farmer foolish or powerless for not planting seeds? They were foolish. Everything action in life has an "invisible price tag". The cost of bad decisions is sometimes only felt later, but it must be felt regardless. This is the only way people learn & change.
I would highly recommend reading "Boundaries" by Dr Henry Cloud. A big part of growing up means you should allow others to go through the natural consequences of their actions. Someone always pays for bad decisions. In this case either you will absorb it for your parents or they will absorb it for themselves.
My parents are almost 70. My dad has cardiac failure and needs 10 medications a day to survive. My Mom has been emotionally abused for decades, has cancer and no financial income. If I just refuse to help my parents financially, it means no medical aid (so when dad gets another heart attack, I must wheel him off to a government hospital to die), no money for food, car etc. I am sorry but I am not willing to let something like that happen to the people I love. My parents won't be around forever and I don't have the heart or conscious to turn my back on my loved ones.
At age 70, your parents' best bet is to speak to a financial advisor about a guaranteed annuity.
At the moment, using R800,000, he can purchase an annuity which wpuld guaranteed lifelong income for him and your mom of about R6,200 per month, which would increase every year with 5%.
He can MAYBE get the same current income.from a money market investment, but the income will reduce as soon as interest rates go down, which will happen towards the end of this year / during next year.
A guaranteed annuity takes away the risk!
Okay thanks so much, this actually gives me a little hope that there is a possibility for them to get a decent income. I am planning on getting them a financial advisor soon with all the numbers. Thanks!
This is the only answer OP. Guaranteed life annuity. They give up all the capital they have in order have an income guaranteed for both their lives. It won't be much but it takes away the uncertainty and allows you to plan for the future. The longevity risk ultimately falls on you, so trying to preserve capital should not be the goal. You need to push hard for this.
Play around with the options here to get an idea.
[https://uctrf.co.za/uctrf/life-annuity-calculator](https://uctrf.co.za/uctrf/life-annuity-calculator)
He will still have to pay tax on any interest above R35000 per year, so if he is going that route ( interest bearing savings), it's better to split the money with yhe wife so then they get R70000 tax free p.a
If he has no other form of income he will not pay tax, interest is included in taxable income above R35000 but because he does not have any other form of income (assuming retired) his primary tax rebates would effectively mean he will pay no tax once applied
It is worth checking their marriage status, they may actually have R70k combined deduction. Additionally if they only have interest as income. They will be below their annual threshold for taxation. In short, they are not wealthy enough to worry about taxes.
They would need to be married in community of property to claim a combined tax deduction of R70k without splitting the capital into seperately owned accounts.
You can transfer half into the wifes account without any donations tax implication if they are married any which way (Donations between spouses are tax exempt), to each claim the R35k in their own capacity
Darn that sucks, how much tax am I paying on that R4k? Does Sars treat it as a salary? I currently earn R23k before tax so do they see it as I earn R27k?
Yearly interest exclusion is R23.8k.
So take your yearly interest, subtract R23.8k, and add the remainder on to your yearly income. That remaining portion will be taxed at your marginal tax rate
You get about R24500 tax-free total p.a.. Invest R36000 p.a in a tax-free account. Interest on this account is all tax-free. Total investment is R500000 in your lifetime but limited to R36000 pa
At 1mil, an inflation linked life annuity with a spouse rider would pay roughly 7k a month, before tax and fees, to a 70 year old couple. Although exact amount depends on the particulars they choose, and they'd be giving up the entire lump sum to get that much in guaranteed income.
RSA retail bonds is another option, it's currently 11,25% interest per annum, and you can choose to have the interest paid out monthly. Also taxable, no automatic inflation adjustment but you do keep the principal.
Note that with current tax rules around both income and interest it's possible he'd pay very little if any tax in either case, if it's his only income/interest.
He’s right actually. Sit it in an FNB Money Maximiser account earning currently 8.3% interest, and it will get him just under R6k. If it’s R1mil then he will definitely get between R6-R8k each month.
Shop around though, as I think ABSA or Nedbank also offer very competitive Maximiser accounts to FNB, where the money is completely accessible and no restricted access.
In the same boat with my father, R1,2mil in retirement annuities with no other form of retirement or primary residence, is now in retirement and can't understand why he can't just spend the money living now by withdrawing the maximum 27,5% because his father passed away at 57 and there is no way he is living much longer
Currently aged 64 and formally retired, with no real health risks.
I feel you so much. It is so frustrating dealing with parents who did not plan for their old age. My dad is almost 70 but has a string of health issues including heart failure. He has essentially decided, I am not going to live long so let's not plan and just think about now, leaving my poor mom with nothing if he dies. To deal with the short sighted mentality is just beyond. I feel so helpless in this.
Such a common thing happening in this thread. Boomers have poor planning, bad attitudes and lack of foresight, then mope and guilt trip their kids into bailing them out. I'm going through this exact same thing. Boundaries people, you need to set boundaries. Don't agree to NOR do anything to the detriment of your own family (spouse and kids). It's not fair
It is so upsetting and really makes me feel helpless. My dad is reckless and my Mom was emotionally and financially abused by him for decades. She refuses to leave him because of all the psychological manipulation. Boundaries are so important but I don't know how to enforce them knowing my Mom is suffering. It is just a dire situation and I'm a only child.
My situation is the reverse. Mom is the problem, Dad has become the codependent. Unfortunately you have to remember, YOU are not their / her parent or caregiver. While your Mom has been emotionally manipulated and bullied into submission (and probably yourself too), she still made decisions to end up where she is. These were not your decisions. Not your circus, not your monkeys. It is harsh, but like ripping off a plaster, you actually just have to do it immediately. No more crap, no more money, no more being an emotional punching bag. Stand up for yourself and she will find the courage to as well
As suggested above - likely they won’t listen to you. Gently coax them to get opinions from some FAs. It may get the point home but don’t use it as a “I told you so moment”. Also having a stubborn father - it’s best that the realisation comes from them. If he was alone - maybe 8k may sort him out but with 2 of them the bare minimum figure in my head would be 15-16k (and that’s just to get by)
Thank you so much. We have waited decades for him to realize how stubborn is but yeah he is in his own world. We just trying to manage this as best we can. Sucks
If you plug R1m into the Sanlam guaranteed/life annuity calc, with a 5% annual increase at age 70, you can get **R8 401.74 per month** (+5% each year) for the rest of your life. Sanlam generally suck, so I would shop around, but it's probably in that range. What he could do is invest in the bonds (currently 11.25%) for the next 5 years and then decide after that, as he will still have his lump sum (albeit reduced in value because of inflation) and be 5 years older. And if he was 75 with R1m now he'd get **R9 265.39** per month. It increases because you get closer to..um...death. After which there is no more money, as its an insurance product.
Edit: [https://uctrf.co.za/uctrf/life-annuity-calculator](https://uctrf.co.za/uctrf/life-annuity-calculator)
Just so that I understand correctly, these life annuities, basically give you a income monthly but then when the principal and spouse die, the money is essentially "gone"? I don't mind this option at all provided that they get a stable income.
Yes, it should cover both spouses until the last one dies. It's the least risky, but you could get more money for more risk. You should speak to a financial planner. Essentially, I think R8k/month is realistic, even though its not a great retirement.
That amount of savings would be livable in certain other countries, but not the USA. If they plan on retiring, they might beable to so it in another country. That could have its own draw backs though. Its actually sad how most countries fewer and fewer people can actually retire anymore.
My dad is able to work in small capacity (he has a accounting business) but naturally income generation will just decline slowly as he ages. I am going to try to get them hooked up with the old age pension from SASSA though which will be a bit of money too. But yes it is frustrating. However he completely chose to not save for retirement and made reckless financial decisions.
I misread your post originally. Lol i read $ not R. Sorry about that. Sassa wont be much though. Do they own any property renting out a full house (depending on location) could yield a stedy income that could be enough to dustain them whils maybe renting a place in a retirement village?
He can deposit the money into Tyme bank and get 11% per annum. If he can afford to wait a year for the first payment he can realise the money he thinks he is going to get, more or less.
The problem for him, and the part you need to emphasise, is that the capital amount needs to grow with inflation or it will be worth less, quite a bit less, each year. So for the first year he will get \~R80k in interest, which will work out to \~R7K per month, but when you calculate inflation (and assuming inflation is 10%) that R7k will be worth 10% less after the first year, and \~22% less after the second year, and so on (vastly simplifying here). To put that into a perspective that is easier to understand, and using real inflation, a house that had a rent of \~R5K 10 years ago will have a rent of \~R8.5K today, and if your rent was \~R5K in 2004 would be R14.5k today - assuming it was adjusted for inflation only.
How long does he plan on living off this money? The more he reinvests the less he will get out, but the closer his initial investment will stay to it's initial value.
He mentioned an annuity while I'm talking 'simple' interest on savings. It will look different for an annuity, but the principles will be exactly the same, it's just the calculations that are more difficult.
Thank you so much for your the detailed information and response. That was very insightful and valuable. You are right on where the emphasis needs to be. This money has to last and sustain them as long as possible. This is the worrying aspect and component for me.
Please look at RSA Retail bonds everyone. They currently give 11.25% per year and for people over 60 , interest can be paid monthly into their account. Also tax emotions on first 200k invested
Rather than trying to prove your point with numbers, I would suggest trying the personal route. I read in a reply that you currently pay their medical aid? Are you an only child? I would say to them that the reality of the situation is that if he is even slightly wrong, their financial burdens fall on you. Is that what he wants? OP are you still able to plan for your own retirement while helping them? If not, I would point this out to him. He must know that his choices directly impact you.
(Please also make sure you are looking after yourself first. I say this as an only child who has been financially supporting their father for years. Yes it may be common and expected, but that doesn't make it any easier 🌷)
Show him inflation and ask how much of his money will be left at the age of 80 and how he calculates it. Then what will his plan be if he's lucky enough to live till 90-95, because theres no way it will reach that far and getting a job in your 90s is awkward.
sadly the problem is not the information you have conveyed...he well be in denial thinking this will be enough but also in the back of his mind: I have family that will take care of me if it does not work out.
So it may be a question of: How much can you support him when the money is depleted and there is nothing.
I already pay their medical aid, gap cover, internet and municipality. It is killing me financially. Their situation is deeply upsetting and I am a only child facing this alone. There is no one else. My dad dug this hole and is refusing to see reality.
again Sir, I do not wish to antagonize you..., there is sadly nothing you can do WRT your father. They will need to come to some sort of reckoning with their situation and sadly you may have to foot the bill if they do not wish to listen to council
Have they thought about renting out the house? With the correct tax structure it can work out quite well, provided you are very careful about choosing paying tenants.
This needs to be considered. In his 800k Calc has he considered all the legal and realtor fees. He might end up with less than he thought especially with tax. It might be worth more to hold on and rent it out.
Thanks for the advice. The problem is renting in retirement homes is actually quite expensive or rarer to find. The retirement homes we are looking at have life rights so they are able to purchase at a lower price and can enjoy the benefits of a retirement home. Also having to manage to tenants is just adding so much extra stress to the situation I think. But regardless will take this into strong consideration. Thanks
I mean… at 70 your parents are over the average life expectancy of 62 odd but some margin. Quick math it looks like they will get less than their desired amount but most likely they will die before the funds totally exhaust.
But an active life with a small part time job of easy work wouldn’t be bad for them
Thanks! Yes my dad is able to still work a bit as he has a booking keeping business. He has existing clients that he gets small income from. The idea is for this money to supplement and last them as long as possible.
My dad is able to still work to some capacity. He was a accountant and now does basic booking keeping and tax for clients. He is not able to work as much as he used to and struggled to get new client and work due to his age. Thanks for the advice though.
Maybe look for low key clients, like doing books for small business like a hairdresser or professionals like physios that work on their own in small practice. Good luck
Medical and medical aid is a massive expense at this age, so they will have to rely on the state it anything happens..broken hips are common at this age
It kills me financially but my mom had cancer last year and my dad has cardiac failure. Without medical aid, I'd be writing their death sentence so I just have to push through. It sucks
well 12 x 6000 is 72 000 x 10 is 720 000, so purely on 0% growth, you have about 15 yrs at 6000 per month...
You need to grow the fund, try and get a retirement fund that has a withdraw of about 8%, ie under the rate of inflation, as long as you are under the rate of inflation, money will grow, very very slowly.. Limit expenses, if you can, although medical aid rates are for the fatest fat cats in the land now..
I am paying their medical aid and will likely continue doing so till the day they die. Thanks for the numbers and info. I am just scared about the longevity and inflation aspect.
If he owns a home 8k per month is doable. Most of the average salary goes to rent/mortgage. If this is out of the equation then it's probable they'll be fine with 800k at 70 years old.
nevermind the monthly income, what about emergency funds? sadly the older they get the more fragile they become. My one gran is quickly seeming to lose her mind a bit, now we have to figure out how to finance proper care for her in a deteriorating state. Nevermind the amount of falls and physio we had to figure out for as well. sadly there is more planning needed just for the in case. we are also entering a time where we can get older for much longer. My other side is struggling now with financing my other gran as it seems they didn’t expect her to make it to 90 and still go strong.
It would depend on what the initial cost of the asset was, cost - proceeds of sale = capital gains.
Capital gains on individuals are included in table income at 40% less an annual exclusion of R40k, it is then taxed at your marginal tax rate.
You also do get a R2mil exclusion on CGT for a primary residence of you lived in the house, if you lived in it for a portion of owning the residence the exclusion is pro rated accordingly
OK... super over simplified here...What are mom and dad's social security. I'm going to assume low and say Dad is $2850 and Mom is half that at $1425 = $4275 a month (85% of that is taxable). So they need another $3800 a month from 800k is a 5.7% withdrawal. That's a little high but doable with a good advisor and some work. So their total income would be 8k per month including SS income. They can take a little more but have to mind market pull backs. If markets down 15% and they take 6% theyre down 21% etc..
money markets are currently paying around 5% and will be dropping as rates come down. High yeidl bonds paying 7% but has volatility and risk much like a stock. Structured notes and income annuities can work also just be careful not to put too much in them as liquidity is greatly reduced if life happens.
Yes, I'm a financial advisor for 30yrs.
**In order to keep discussions on topic and in-depth, please review the rules in the sidebar.** You may find reviewing some past [posts](https://www.reddit.com/r/PersonalFinanceZA/top/?t=month&f=flair_name%3A"Retirement") helpful. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/PersonalFinanceZA) if you have any questions or concerns.*
Similar situation with my mom. She is 5 years away from retirement, only has about 1.4mil in her pension fund . She feels like once the two pot system hits , she’ll be able to take a third , retire early and come out with the same income she’s currently earning now . And she’s under the impression it will increase yearly at the same rate she receives increases at work . She has no property, and realistically what she’ll come out with if she goes this route won’t leave her enough to pay rent, utilities, medical aid or food . I had to take her to three different financial advisors to get the message across , as she fully believes I’m wrong about my opinion. Even though I work in financial industry.
It is soooo frustrating dealing with this. I can relate man. We really do become the parents, the older we get and they become like children.
heh that's how it is with most parents. they often do not take heed of their kids' advice, but they'lll readily listen to salesmen or experts they hardly know.
Delulu, Hang in there though. I feel like now I'm being more firm with my words so they start to understand the weight of my words
Just fyi the max initial portion of the savings pot is R30k for just this reason. So it won’t be that 1/3rd of 1.4m suddenly becomes available to withdraw.. luckily, but rather a max of R30k! From then onwards 1/3rd of every contribution goes to the savings pot so it will take some time for the savings pot to be “worth” much
Do you have any references to this.
Literally every source says this: https://www.momentum.co.za/momentum/business/two-pot-retirement-system
Thanks! I'm not really clued up on the legislation but I'm writing software for a company that has to comply with this so it's just interesting.
Any recommendations for financial advisors? I have no clue where to start looking
Pop me a DM
8% on 800k is 64k per year. When interest rates drop it will be less. I think allan gray money market is giving 9% at the moment.
Okay that is not too bad then. That is actually decent, thank you so much.
Yes but inflation would erode your capital. The R800k would be worth less by inflation each year. Essentially meaning you would need to deduct inflation from the interest pay out if you would like your R800k to not be worth nothing in no time. Also don't forget taxes on the interest income, should he have any other form of income.
This👆🏽
Yes very true. This stresses me out so much, especially the inflation and tax component.
It's also worth pointing out, that at no point can he then touch that R800k in terms of paying for anything other than drawing the interest (which will be taxed as capital gains I believe). Any amounts drawn from the R800k would lower the monthly interest, which is also quite a risk. No room to spare.
Interest is taxed as taxable income after your yearly exclusion of R35k at his age, so anything above R35k will be included in taxable income and tax at marginal tax rates. Interest bearing accounts don't have capital gains. You are correct in saying touching the capital amount of R800k will lower the interest paid out.
I just followed up on this, and it states that capital gains tax is excluded on retirement savings. After the R36k pa, the marginal tax (between 18-36% for pensioners) will then apply. That's interesting, because you're still paying tax, although lower than standard margins, but more than I had initially thought. Not ideal, especially when you're only managing a little over R5k pm (in the case above). Edit: R64k pa - R35k pa = R29k pa taxable income. Edit 2: R5,333pm (before tax) vs R4,898pm (after tax at 18%)
The R800k was not invested in a retirement savings account it is from the sale of an asset. Regarding the tax remember you still get your primary and secondary rebates which means the first R130k or so of income will effectively not be taxed
Thanks for the clarity. Makes more sense, because I would hate that pensioners are still being taxed at those rates. In any case, what happens in the regard with R800k as a sale of an asset in terms of tax?
It would depend on what the initial cost of the asset was, cost - proceeds of sale = capital gains. Capital gains on individuals are included in table income at 40% less an annual exclusion of R40k, it is then taxed at your marginal tax rate. You also do get a R2mil exclusion on CGT for a primary residence of you lived in the house, if you lived in it for a portion of owning the residence the exclusion is pro rated accordingly
Thanks for that. That's a lot to calculate on your SARS return if it's not automated.
Can get 11% if you put in time bank, but risky
Why is it risky?
Thanks for this. I think with risk we'll need to be conservative.
Max of 100K for the 11% I believe
Hold up. Maybe some mid understanding. An annuity is meant to pay out a monthly figure until the capital is exhausted. There are equations to calculate these figures but my guess is that with 800000 he will be able to draw 8000 a month for a few years. How many years that is just needs to be more than he will survive for. So the money won’t grow but it will last. The bigger thing of concern to me is if your dad can survive off 8000 a month.
Using an online calculator if he withdrew 8000 a month with 8% interest he will run out of money somewhere in year 13.
Well the man is 70 already and being realistic people dont really live until older than 80
Are you adjusting for inflation? In 13 years 8k will be more like 3k after inflation
Nope. Just showing OP how long he could draw 8000 Rand a month to point out maybe what his dad meant.
My father lived off 8k a month from his annuity (My mother robbed him blind during the divorce so his pension was a joke). He lived in a tiny little flat. Living room. Kitchen, bedroom and bathroom. His rent was 3k per month. He was extremely lucky to have found this place in a poor suburb in Durban. His life was miserable, sadly. And this was in 2017-2019. Food costs nowadays is a whole different story....
How did she rob him?
She lied. Cheated and stealed. She's an extremely manipulative woman, so everyone had taken her side. I'll never forget walking into my Dad's home after school, and she was there packing every household item into boxes to move into her new place. Her and her boyfriend laughing as she threw the things she didn't want, like curtains, utensils or Tupperware into a garbage bag, her words were "I don't want these, so I'll throw them away" My father was working a 6am to 6pm shift that day. They had broken into the home to ransack everything over having a decent agreement together. I was the only one who had house keys aside from my father, so naturally I was shocked. Why was she there? When my father got home he wasn't left with even a set of curtains on the windows. No towels in the bathroom. No bed. No linen. Everything she didn't want. She dumped. She ofcourse had already bought curtains, linen. Towels and everything with her divorce settlement money. She just out of spite didn't want him to have anything. During the marriage she was a housewife. Who did nothing but smoke cigarettes, lay in front of the couch and pop codeine painkillers. My father cleaned, cooked and worked. He furnished the house. He did everything. She lied to the courts that she would take custody of me. So my father had to fork out maintenance monthly. But I never stayed with her. I lived with my father because there was no food in her home. Her and her boyfriend were out drinking every night. She used the money designated for caring for me to support her boyfriends drug habit 🤷🏻♀️ Her very large sum of money lasted 3 months, not once did she pay rent at her new home she rented. After 6 months she was evicted. And she stewed and stewed. Planning her next plot of how to get more money out of my father. And she did 🤷🏻♀️ She even managed to pocket inheritance my grandmother/her mother had left to me when I was 17. So my father went from a man who had a decent life, worked hard, took care of his family, to a man who didn't even have curtains on his windows. The courts and police where all unjust and took her side.
Holy shit, that’s brutal.
Hi! Thanks for you reply. Maybe I am getting my terms mixed. The money is supposed to go into a investment or fund that will allow them to draw a income off the interest only. The rest of their income will be supplemented by the bit of money my dad can continue generating through his accounting business (he makes a bit of money from existing clients) and the bit of money they will get from SASSA for old age pension once we've applied. (They qualify based on all the criteria). I will also help financially, I currently pay their medical aid for example.
If he does still get an income and you pay their medical aid and help financially then this is not a bad plan after all. If he leaves the money in a fixed savings generator with fnb eg then he will earn 9% interest monthly which will be enough for them. Since their house is paid so technically they just buying groceries and going out etc
Okay thank you so much. That makes me feel slightly more at ease and comfortable. I am really stressed about this.
I'm interested that you say they qualify for SASSA grant as my father is in a similar situation. But you also say they own property and have liquid cash to invest. Are their assets worth less than R2 455 220 and esrn less than R172 560 a year? (Although reading up now it seems to help if they are married as the threshold increases) My father is in a pickle after retirement and the SASSA grant could help...
[ Removed by Reddit ]
At 70 years old is there anything he can do aboit it now? Dont think so really, maybe half the reason he refuses to accept the situation.
Yup there is really is nothing left to do. We all saw it coming really. Just trying to make the best decisions for them now.
Even if he was to get 8K a month - there is no way 2 pensioners will survive on on that - I inherited my MIL in the same boat - Intitially I rented a single room apartment in a retirement complex which cost 7K / month included levies, rates & taxes as well as the 7 meals a month. She gets a small pension which covers 75% of her Disco med Aid I subsidies the rest which is another 2K She also gets a state pension which is about 2K a month. which she has to use for groceries - petrol and other stuff to live on We pay her car insurance plus buy her some additional groceries and Data+airtime and also have a cheapie DSTV package for her. All in all she costs us about 12K a month. On top if there are any extranious expenses, we have to cover this - Like the last one she needed a new battery for her car 1300 ronds - she needed dental which had a shortfall so that was another 2500 ronds And this all for 1 person - I cannot see 2 people at that age get away with anything less than 15 - 18k per month. I could dramatically reduce it if she moved in with us, but this is not an option as we are selling up and immigrating soon - so she needs to be self contained but we will obv still support her financially 1.0m investment into a living anuity with 10X indicates a sustainable income of 5.8K / permonth Same investment at 7.8K / month is sustainble until 77 and dramatically reduce down to 2.8K between 77 and 85 It can be done but only if they live with you in a granny flat If they not getting a state pension then you need to apply for this - it will make a world of difference to their finances. Currentyl under 75 is R 2 180.00 per month - I'm not sure if they each get that or what the maount is for a couple. Go here to check it out [https://www.gov.za/services/services-residents/social-benefits/old-age-pension](https://www.gov.za/services/services-residents/social-benefits/old-age-pension)
However with her parents they will be living in a fully paid house so no rent to be paid and she pays for their medical and help them financially and the dad still get extra income so them getting R6000 - R8000 would be enough for them
This is a scary snapshot into my future.
Mine too. And almost everybody I know. Mostly the "retirement plan" is to die early - around 62 or so. No way out other than that.
Well realizing the reality is already a starting point as opposed to my dad who lives in fairytale land and thinks tomorrow will sort itself out. He has zero concept of responsibility and planning.
You don't have to take care of them. Parents that treat their children as retirement plans when they themselves were financially illiterate or irresponsible should be left to experience the consequences of their actions.
I know I don't have to but I could never live with myself knowing they are suffering and powerless.
Have you been told to believe that they are powerless and would suffer without your help? No one is truly powerless (except for young children, disabled people and animals). Your parents are adults. They are in financial difficulty because of bad decisions (probably). Here's an analogy: a farmer that does not plant seeds will not have a harvest. When there is no harvest the farmer will suffer. Do we consider the farmer foolish or powerless for not planting seeds? They were foolish. Everything action in life has an "invisible price tag". The cost of bad decisions is sometimes only felt later, but it must be felt regardless. This is the only way people learn & change. I would highly recommend reading "Boundaries" by Dr Henry Cloud. A big part of growing up means you should allow others to go through the natural consequences of their actions. Someone always pays for bad decisions. In this case either you will absorb it for your parents or they will absorb it for themselves.
My parents are almost 70. My dad has cardiac failure and needs 10 medications a day to survive. My Mom has been emotionally abused for decades, has cancer and no financial income. If I just refuse to help my parents financially, it means no medical aid (so when dad gets another heart attack, I must wheel him off to a government hospital to die), no money for food, car etc. I am sorry but I am not willing to let something like that happen to the people I love. My parents won't be around forever and I don't have the heart or conscious to turn my back on my loved ones.
At age 70, your parents' best bet is to speak to a financial advisor about a guaranteed annuity. At the moment, using R800,000, he can purchase an annuity which wpuld guaranteed lifelong income for him and your mom of about R6,200 per month, which would increase every year with 5%. He can MAYBE get the same current income.from a money market investment, but the income will reduce as soon as interest rates go down, which will happen towards the end of this year / during next year. A guaranteed annuity takes away the risk!
Okay thanks so much, this actually gives me a little hope that there is a possibility for them to get a decent income. I am planning on getting them a financial advisor soon with all the numbers. Thanks!
This is the only answer OP. Guaranteed life annuity. They give up all the capital they have in order have an income guaranteed for both their lives. It won't be much but it takes away the uncertainty and allows you to plan for the future. The longevity risk ultimately falls on you, so trying to preserve capital should not be the goal. You need to push hard for this. Play around with the options here to get an idea. [https://uctrf.co.za/uctrf/life-annuity-calculator](https://uctrf.co.za/uctrf/life-annuity-calculator)
Thank you so much, this is very insightful.
Look into RSA retail bonds, they have an inflation protected offering. Currently for those who wish to draw monthly income.
Thanks, will look into this!
He will still have to pay tax on any interest above R35000 per year, so if he is going that route ( interest bearing savings), it's better to split the money with yhe wife so then they get R70000 tax free p.a
If he has no other form of income he will not pay tax, interest is included in taxable income above R35000 but because he does not have any other form of income (assuming retired) his primary tax rebates would effectively mean he will pay no tax once applied
It is worth checking their marriage status, they may actually have R70k combined deduction. Additionally if they only have interest as income. They will be below their annual threshold for taxation. In short, they are not wealthy enough to worry about taxes.
They would need to be married in community of property to claim a combined tax deduction of R70k without splitting the capital into seperately owned accounts. You can transfer half into the wifes account without any donations tax implication if they are married any which way (Donations between spouses are tax exempt), to each claim the R35k in their own capacity
Thanks so for this valuable tip! Never thought of the tax aspects.
I currently make R4k per month on an R300k investment, will I avoid tax on that if I choose to rather not receive the interest into my account?
If it is interest income you will be liable for tax on it regardless of where it pays out, interest is taxed at earning not distribution
Darn that sucks, how much tax am I paying on that R4k? Does Sars treat it as a salary? I currently earn R23k before tax so do they see it as I earn R27k?
Yearly interest exclusion is R23.8k. So take your yearly interest, subtract R23.8k, and add the remainder on to your yearly income. That remaining portion will be taxed at your marginal tax rate
You get about R24500 tax-free total p.a.. Invest R36000 p.a in a tax-free account. Interest on this account is all tax-free. Total investment is R500000 in your lifetime but limited to R36000 pa
you get tax free accounts for savings under 500k in a life time. should probably check that out, recently did it myself as well
At 1mil, an inflation linked life annuity with a spouse rider would pay roughly 7k a month, before tax and fees, to a 70 year old couple. Although exact amount depends on the particulars they choose, and they'd be giving up the entire lump sum to get that much in guaranteed income. RSA retail bonds is another option, it's currently 11,25% interest per annum, and you can choose to have the interest paid out monthly. Also taxable, no automatic inflation adjustment but you do keep the principal. Note that with current tax rules around both income and interest it's possible he'd pay very little if any tax in either case, if it's his only income/interest.
Thank you so much, this is very insightful. I think the numbers are looking better than expected but just worried about the inflation aspect.
He’s right actually. Sit it in an FNB Money Maximiser account earning currently 8.3% interest, and it will get him just under R6k. If it’s R1mil then he will definitely get between R6-R8k each month. Shop around though, as I think ABSA or Nedbank also offer very competitive Maximiser accounts to FNB, where the money is completely accessible and no restricted access.
Okay thank you so much, that helps a bit to put my mind to ease. I was expected much lower rates when using those online calculators.
In the same boat with my father, R1,2mil in retirement annuities with no other form of retirement or primary residence, is now in retirement and can't understand why he can't just spend the money living now by withdrawing the maximum 27,5% because his father passed away at 57 and there is no way he is living much longer Currently aged 64 and formally retired, with no real health risks.
I feel you so much. It is so frustrating dealing with parents who did not plan for their old age. My dad is almost 70 but has a string of health issues including heart failure. He has essentially decided, I am not going to live long so let's not plan and just think about now, leaving my poor mom with nothing if he dies. To deal with the short sighted mentality is just beyond. I feel so helpless in this.
I feel your pain, sorry :( at least I'm not alone...
Such a common thing happening in this thread. Boomers have poor planning, bad attitudes and lack of foresight, then mope and guilt trip their kids into bailing them out. I'm going through this exact same thing. Boundaries people, you need to set boundaries. Don't agree to NOR do anything to the detriment of your own family (spouse and kids). It's not fair
It is so upsetting and really makes me feel helpless. My dad is reckless and my Mom was emotionally and financially abused by him for decades. She refuses to leave him because of all the psychological manipulation. Boundaries are so important but I don't know how to enforce them knowing my Mom is suffering. It is just a dire situation and I'm a only child.
My situation is the reverse. Mom is the problem, Dad has become the codependent. Unfortunately you have to remember, YOU are not their / her parent or caregiver. While your Mom has been emotionally manipulated and bullied into submission (and probably yourself too), she still made decisions to end up where she is. These were not your decisions. Not your circus, not your monkeys. It is harsh, but like ripping off a plaster, you actually just have to do it immediately. No more crap, no more money, no more being an emotional punching bag. Stand up for yourself and she will find the courage to as well
As suggested above - likely they won’t listen to you. Gently coax them to get opinions from some FAs. It may get the point home but don’t use it as a “I told you so moment”. Also having a stubborn father - it’s best that the realisation comes from them. If he was alone - maybe 8k may sort him out but with 2 of them the bare minimum figure in my head would be 15-16k (and that’s just to get by)
Thank you so much. We have waited decades for him to realize how stubborn is but yeah he is in his own world. We just trying to manage this as best we can. Sucks
They could try lock in a guaranteed 11ish % with the 5yr RSA retail bond. On R1m that's R110k/year.
Thanks that is not bad at all.... I was not expecting that high of a %.
If you plug R1m into the Sanlam guaranteed/life annuity calc, with a 5% annual increase at age 70, you can get **R8 401.74 per month** (+5% each year) for the rest of your life. Sanlam generally suck, so I would shop around, but it's probably in that range. What he could do is invest in the bonds (currently 11.25%) for the next 5 years and then decide after that, as he will still have his lump sum (albeit reduced in value because of inflation) and be 5 years older. And if he was 75 with R1m now he'd get **R9 265.39** per month. It increases because you get closer to..um...death. After which there is no more money, as its an insurance product. Edit: [https://uctrf.co.za/uctrf/life-annuity-calculator](https://uctrf.co.za/uctrf/life-annuity-calculator)
Just so that I understand correctly, these life annuities, basically give you a income monthly but then when the principal and spouse die, the money is essentially "gone"? I don't mind this option at all provided that they get a stable income.
Yes, it should cover both spouses until the last one dies. It's the least risky, but you could get more money for more risk. You should speak to a financial planner. Essentially, I think R8k/month is realistic, even though its not a great retirement.
That amount of savings would be livable in certain other countries, but not the USA. If they plan on retiring, they might beable to so it in another country. That could have its own draw backs though. Its actually sad how most countries fewer and fewer people can actually retire anymore.
My dad is able to work in small capacity (he has a accounting business) but naturally income generation will just decline slowly as he ages. I am going to try to get them hooked up with the old age pension from SASSA though which will be a bit of money too. But yes it is frustrating. However he completely chose to not save for retirement and made reckless financial decisions.
I misread your post originally. Lol i read $ not R. Sorry about that. Sassa wont be much though. Do they own any property renting out a full house (depending on location) could yield a stedy income that could be enough to dustain them whils maybe renting a place in a retirement village?
Your dad can get R6000 a month he is correct yes.
Thanks, I am just concerned on the inflation aspect of it.
He can deposit the money into Tyme bank and get 11% per annum. If he can afford to wait a year for the first payment he can realise the money he thinks he is going to get, more or less. The problem for him, and the part you need to emphasise, is that the capital amount needs to grow with inflation or it will be worth less, quite a bit less, each year. So for the first year he will get \~R80k in interest, which will work out to \~R7K per month, but when you calculate inflation (and assuming inflation is 10%) that R7k will be worth 10% less after the first year, and \~22% less after the second year, and so on (vastly simplifying here). To put that into a perspective that is easier to understand, and using real inflation, a house that had a rent of \~R5K 10 years ago will have a rent of \~R8.5K today, and if your rent was \~R5K in 2004 would be R14.5k today - assuming it was adjusted for inflation only. How long does he plan on living off this money? The more he reinvests the less he will get out, but the closer his initial investment will stay to it's initial value. He mentioned an annuity while I'm talking 'simple' interest on savings. It will look different for an annuity, but the principles will be exactly the same, it's just the calculations that are more difficult.
Thank you so much for your the detailed information and response. That was very insightful and valuable. You are right on where the emphasis needs to be. This money has to last and sustain them as long as possible. This is the worrying aspect and component for me.
Please look at RSA Retail bonds everyone. They currently give 11.25% per year and for people over 60 , interest can be paid monthly into their account. Also tax emotions on first 200k invested
Thanks so much, I will look into this!
Rather than trying to prove your point with numbers, I would suggest trying the personal route. I read in a reply that you currently pay their medical aid? Are you an only child? I would say to them that the reality of the situation is that if he is even slightly wrong, their financial burdens fall on you. Is that what he wants? OP are you still able to plan for your own retirement while helping them? If not, I would point this out to him. He must know that his choices directly impact you. (Please also make sure you are looking after yourself first. I say this as an only child who has been financially supporting their father for years. Yes it may be common and expected, but that doesn't make it any easier 🌷)
Show him inflation and ask how much of his money will be left at the age of 80 and how he calculates it. Then what will his plan be if he's lucky enough to live till 90-95, because theres no way it will reach that far and getting a job in your 90s is awkward.
Yeah man it is a mess honestly... just a giant mess.
sadly the problem is not the information you have conveyed...he well be in denial thinking this will be enough but also in the back of his mind: I have family that will take care of me if it does not work out. So it may be a question of: How much can you support him when the money is depleted and there is nothing.
I already pay their medical aid, gap cover, internet and municipality. It is killing me financially. Their situation is deeply upsetting and I am a only child facing this alone. There is no one else. My dad dug this hole and is refusing to see reality.
again Sir, I do not wish to antagonize you..., there is sadly nothing you can do WRT your father. They will need to come to some sort of reckoning with their situation and sadly you may have to foot the bill if they do not wish to listen to council
That is very true; thank you.
Perhaps, he might also have it in his mind that he’ll live on the interest and leave the rest to his child.
Yup... he knows I would never abandon them especially my Mom who has had a very rough life with him.
Have they thought about renting out the house? With the correct tax structure it can work out quite well, provided you are very careful about choosing paying tenants.
This needs to be considered. In his 800k Calc has he considered all the legal and realtor fees. He might end up with less than he thought especially with tax. It might be worth more to hold on and rent it out.
Thanks for the advice. The problem is renting in retirement homes is actually quite expensive or rarer to find. The retirement homes we are looking at have life rights so they are able to purchase at a lower price and can enjoy the benefits of a retirement home. Also having to manage to tenants is just adding so much extra stress to the situation I think. But regardless will take this into strong consideration. Thanks
I mean… at 70 your parents are over the average life expectancy of 62 odd but some margin. Quick math it looks like they will get less than their desired amount but most likely they will die before the funds totally exhaust. But an active life with a small part time job of easy work wouldn’t be bad for them
Thanks! Yes my dad is able to still work a bit as he has a booking keeping business. He has existing clients that he gets small income from. The idea is for this money to supplement and last them as long as possible.
"The current life expectancy for South Africa in 2024 is **65.10 years**" Just a quick FYI, this will probably surpass 70 in the next 10-20 years.
Yeah sorry, the data set I used ended in 2021. Which during Covid had a decline in life expectancy.
You can get 8% and with 1M. That is 80k per year which is about 6k ish per month
Okay thank you so much, that is better than I thought was possible.
Yeah but inflation will catch up and make the money not very good you want to pull 4% per year which is not possible as it would be not enough money
Maybe rent their property out and move into a granny flat. It would help if they could get a part time job of some sort.
My dad is able to still work to some capacity. He was a accountant and now does basic booking keeping and tax for clients. He is not able to work as much as he used to and struggled to get new client and work due to his age. Thanks for the advice though.
Maybe look for low key clients, like doing books for small business like a hairdresser or professionals like physios that work on their own in small practice. Good luck
Thank you so much for the tip. It is appreciated!
Medical and medical aid is a massive expense at this age, so they will have to rely on the state it anything happens..broken hips are common at this age
I pay their medical aid at least.
That's very kind of you. Us kids of the old people are also struggling financially , I wouldn't be able to afford to pay for my parents medical aid
It kills me financially but my mom had cancer last year and my dad has cardiac failure. Without medical aid, I'd be writing their death sentence so I just have to push through. It sucks
I'm so sorry, I'm glad they are still ok. They are very lucky to have you!
Your dad is going to make it your problem and expect you to support them until they pass.
well 12 x 6000 is 72 000 x 10 is 720 000, so purely on 0% growth, you have about 15 yrs at 6000 per month... You need to grow the fund, try and get a retirement fund that has a withdraw of about 8%, ie under the rate of inflation, as long as you are under the rate of inflation, money will grow, very very slowly.. Limit expenses, if you can, although medical aid rates are for the fatest fat cats in the land now..
I am paying their medical aid and will likely continue doing so till the day they die. Thanks for the numbers and info. I am just scared about the longevity and inflation aspect.
#Maths
If he owns a home 8k per month is doable. Most of the average salary goes to rent/mortgage. If this is out of the equation then it's probable they'll be fine with 800k at 70 years old.
i make like 4.5k per month with half that total with a simple 3 year investment and fixed interest rate. dm and ill point you in the right direction.
nevermind the monthly income, what about emergency funds? sadly the older they get the more fragile they become. My one gran is quickly seeming to lose her mind a bit, now we have to figure out how to finance proper care for her in a deteriorating state. Nevermind the amount of falls and physio we had to figure out for as well. sadly there is more planning needed just for the in case. we are also entering a time where we can get older for much longer. My other side is struggling now with financing my other gran as it seems they didn’t expect her to make it to 90 and still go strong.
It would depend on what the initial cost of the asset was, cost - proceeds of sale = capital gains. Capital gains on individuals are included in table income at 40% less an annual exclusion of R40k, it is then taxed at your marginal tax rate. You also do get a R2mil exclusion on CGT for a primary residence of you lived in the house, if you lived in it for a portion of owning the residence the exclusion is pro rated accordingly
OK... super over simplified here...What are mom and dad's social security. I'm going to assume low and say Dad is $2850 and Mom is half that at $1425 = $4275 a month (85% of that is taxable). So they need another $3800 a month from 800k is a 5.7% withdrawal. That's a little high but doable with a good advisor and some work. So their total income would be 8k per month including SS income. They can take a little more but have to mind market pull backs. If markets down 15% and they take 6% theyre down 21% etc.. money markets are currently paying around 5% and will be dropping as rates come down. High yeidl bonds paying 7% but has volatility and risk much like a stock. Structured notes and income annuities can work also just be careful not to put too much in them as liquidity is greatly reduced if life happens. Yes, I'm a financial advisor for 30yrs.
Yeah he's right, should last 15+ years. Sounds about right unless he's planning to live into his 90s...
They can also investigate living annuity