Is a Retirement Annuity Still Worth It in 2025? A Brutally Honest Look

 

🚨 "Retirement Annuities are outdated." Or are they?

You've probably heard it before — "RAs are a tax trap," or "You're better off investing offshore."
In 2025, these claims are louder than ever.

But here's the truth: a retirement annuity can still be one of the smartest financial tools available — if you know how to use it.

Let’s break through the noise, give you the facts (not the fluff), and help you make a clear, confident decision.

🔍 What Exactly Is a Retirement Annuity (RA) in 2025?

An RA is a tax-advantaged investment account designed to help South Africans save for retirement. You're locking away your money until at least age 55 — but in exchange, SARS gives you serious tax relief.

Generated image

💸 Retain: So… Is It Worth It?

Let’s weigh the honest Pros and Cons — no sugarcoating.

✅ The Pros (Why RAs Still Work in 2025)

  1. Massive Tax Deductions
    You can deduct up to 27.5% of your income (capped at R350,000/year). That’s not pocket change — it’s a legal way to pay less tax and invest more.

  2. Tax-Free Growth
    No capital gains tax. No dividends tax. No income tax while it grows.

  3. Creditor Protection
    Your RA is safe from debt collectors. Huge if you’re an entrepreneur or high-risk earner.

  4. Forced Discipline
    You can’t touch the money until you’re 55. Sounds like a con? Not if you struggle with dipping into savings.

❌ The Cons (What No One Tells You)

  1. Locked-In Until 55
    No access = no liquidity. If flexibility matters more than tax breaks, look elsewhere.

  2. Limited Fund Choices
    You’re stuck with Regulation 28. That means only 30% offshore exposure and limited high-growth assets.

  3. Annuity at Retirement
    You must buy a living or guaranteed annuity with two-thirds of the total. That’s not always ideal depending on interest rates and inflation.

Pros and Cons List: Make Tough Decisions Easier

🎯 Reward: Should You Be Using an RA?

Here’s when an RA is still a very smart move:

  • You earn over R240k+ per year and want to cut your tax bill

  • You have other short-term savings and don’t need this money before age 55

  • You want structured, disciplined growth with low fees

  • You’re already maxing out your TFSA and want to grow even more

But skip it if:

  • You’re living month-to-month and need flexibility

  • You’re already well-diversified offshore and don’t need more local exposure

  • You’re under 30 and prefer hyper-growth investments without rules

🧠 What I Tell My Clients

As a financial advisor, my job isn’t to sell you products. It’s to help you build a financial strategy that matches your real life.

And that means sometimes an RA is perfect, and other times it’s a trap in disguise.

📍 Need help deciding if an RA fits your exact situation?
👉 Book a 1-on-1 call with me and let’s talk through it — no jargon, no pressure.

🔄 TL;DR — Is an RA Worth It in 2025?

Situation RA Still Worth It?
Earning well & want tax relief ✅ Yes
Need cash before 55 ❌ No
Already maxing TFSA ✅ Yes
Want full offshore exposure ❌ No

Bottom line: Retirement annuities are still powerful — but only if used with purpose. Like any tool, they can build your future or box you in.

🔑 Final Word

In finance, context is everything. Don’t follow blanket advice on TikTok or from your uncle who “read something.”
Your goals, income, and lifestyle deserve a personal strategy.

📅 Book a quick call with me here
I’ll help you figure out if and how a retirement annuity fits into your 2025 financial plan — and if it doesn’t, I’ll help you find something better.

Back to blog