If you’ve worked hard your whole life and are currently getting ready to trade your work clothes and coffee mug for a Hawaiian shirt and a pina colada, you might be feeling slightly anxious. Justifiably so: approaching retirement can be exciting but also unnerving, and soon-to-be-retirees have much to think about. Andre Tuck, Investment Consultant Team Lead at retirement specialist10X Investmentsanswers a few common questions on income products, drawdowns, budgets and tax to hopefully give you more peace of mind.
Before retirement, it was up to you to build a savings pot to finance the lifestyle you wanted in retirement. After you retire, you are obliged by law to use at least two thirds of your retirement savings to buy an annuity, which will pay you an income in retirement. There are two types of annuities you can choose from: a guaranteed annuity (also known as life annuity) or aliving annuity.
There are two types of annuities you can choose from: a guaranteed annuity (also known as life annuity) or a What’s the difference between a living annuity and a guaranteed annuity? A guaranteed (or life) annuity is an insurance-type product, where the insurer pays you a specified amount every month for the rest of your life. While this insures you against longevity risk (the risk of outliving your savings), it comes with a few limitations.
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These include not having any control over how your money is invested and not having the flexibility to draw a lower or higher income. This can be inconvenient should your expenses change, or if you wanted to spoil yourself with, say, an overseas trip. Another downside is that in most cases your policy dies with you, and even though you may be able to make provision for your spouse, no money passes to your heirs.
Aliving annuity,on the other hand, is an investment-type product that transfers the risk and responsibility for securing a sustainable income to you. This gives you more control (and responsibility), with greater investment and income flexibility. Plus, your heirs will inherit whatever is left of your capital after your death.
on the other hand, is an investment-type product that transfers the risk and responsibility for securing a sustainable income to you. These products address different needs. Therefore, this decision requires careful evaluation of your personal circumstances and plans for your retirement.
There are a host of factors to consider, for example your health, age, desired income, how much you have saved and the needs of a financially dependent spouse. You will also need to think about whether you prefer a secure or flexible income and whether you want to leave something for your heirs. It’s important to do your research andspeak to a retirement expertto get the facts that will help you make the decision that’s best for you. It’s important to do your research and
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