i What this calculator does
Quick answer: A living annuity can pay between 2.5% and 17.5% of its capital a year; how long the income holds its value depends on the starting rate, returns and fees. With the default inputs the calculator returns monthly income, year 1: R12 500.
A living annuity pays you an income you choose each year, between 2.5% and 17.5% of the capital, and leaves the rest invested. The choice is the whole risk: draw too much and the income has to fall later, because the percentage that would keep it rising with inflation eventually exceeds the 17.5% ceiling. This calculator projects the annuity year by year from your capital, age, drawdown rate, return, fees and inflation, taxes each year’s income with the SARS 2026/27 tables and the age rebates, and shows the income in today’s money so a rising rand figure cannot hide a falling standard of living.
It also finds the highest starting drawdown that keeps an inflation-linked income inside the legal band to the age you plan for. The background on choosing between a living and a guaranteed annuity is in cash or annuity at retirement.
This calculator is for educational purposes only. Results are estimates and may vary depending on market conditions, spreads, commissions, platform settings, and exchange rates. It should not be considered financial advice.
Common results
What the calculator returns as the starting drawdown changes, with every other input at its default (living annuity capital 3000000, your age 65, expected return before fees 9, total annual fees 1.5, inflation 4.5, income plan Raise the rand income with inflation, other taxable income a year 0, plan to age 95).
| Starting drawdown | After tax, per month | Income at 85, today’s money | Sustainable starting drawdown |
|---|---|---|---|
| 2.5% | R6 250 | R6 585 | 4.4% |
| 4% | R10 000 | R10 000 | 4.4% |
| 5% | R12 500 | R12 500 | 4.4% |
| 6% | R14 599 | R8 610 | 4.4% |
| 8% | R18 699 | R3 704 | 4.4% |
| 10% | R22 433 | R2 577 | 4.4% |
Figures used in this calculator
The South African constants this calculator relies on, with the page that holds the current value and the date it was last verified.
- Income tax brackets and rebates, 2026/27: Primary R17,820, secondary R9,765 from 65, tertiary R3,249 from 75. Source: SARS Income Tax Tables 2026/27 (verified 27 September 2026).
- Living annuity drawdown band: 2.5% to 17.5% of the capital a year. Source: Cash or Annuity? Retirement Lump Sum (verified 19 July 2026).
How the 17.5% ceiling decides the outcome
If you want the same buying power every year, the rand income must rise with inflation while the capital is shrinking, so the drawdown percentage climbs. Once it would need to exceed 17.5%, the law caps it and the income starts falling in real terms, usually quickly. The calculator reports the age that happens and the age at which the income buys less than half of what it buys in year one. A starting rate of around 4% to 5%, on a balanced portfolio after fees, typically holds the line into the late 80s or 90s; 7% or more rarely does.
Tax on a living annuity
Annuity income is taxed as ordinary income through PAYE by the insurer, with the age rebates: from 65 the secondary rebate lifts the tax-free threshold to R153,250 in 2026/27, and from 75 the tertiary rebate lifts it to R171,300. Other income such as a pension or rent is counted first, so the annuity is taxed at your marginal rate on top of it. The calculator assumes brackets and rebates rise with inflation, which is close to how SARS has adjusted them in most years.
What to change if the income will not last
Fees are the lever most people overlook: 1% a year less in fees has roughly the same effect as 1% a year more return. After that, a lower starting rate, a few years’ later retirement, or using part of the capital to buy a guaranteed annuity for the essentials all move the sustainable age out. You can change the drawdown rate once a year on the anniversary, so revisit the projection each year rather than setting it once.
Spotted an outdated figure? If a rate, limit or formula in this calculator no longer matches its source, email us the page and the source. A material correction is dated on the Updates Log.
Frequently asked questions
What drawdown rates are allowed on a living annuity?
Between 2.5% and 17.5% of the capital a year. You choose the rate when you start and can change it once a year on the policy anniversary.
What is a safe drawdown rate in South Africa?
There is no guaranteed rate, but 4% to 5% from about age 65, on a balanced portfolio with moderate fees, has historically held an inflation-linked income for 25 to 30 years. Above 6% the risk that the income must fall later rises sharply.
How is living annuity income taxed?
As normal income at your marginal rate, with PAYE deducted by the insurer. The age rebates apply, so a 65-year-old with no other income pays no tax on the first R153,250 a year in 2026/27.
Can I take my living annuity as cash?
Only if the capital is below R125,000; the fund may then pay it out as a lump sum, taxed under the retirement lump sum tables. Above that the money must stay in the annuity.
What happens to a living annuity when I die?
The remaining capital goes to your nominated beneficiaries, as an annuity or a lump sum, and it does not form part of your estate for estate duty. That is one of the main differences from a guaranteed life annuity.
Why does the calculator show the income in today’s money?
Because a rand amount 20 years from now buys much less. At 4.5% inflation, R20,000 a month in 20 years buys what about R8,300 buys today, so the real figure is the one that tells you whether the plan works.
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