Annuities vs. Drawdown
Generating Income in Retirement
The range of products available is growing.
There have been many changes to pension legislation that are likely to have significant impact on those planning to enter retirement. Where annuities were previously the default product for the vast majority of retirees, the choices over how to generate income have become much wider.
With such a myriad of options opening up, how do you find the best solution? How do you make sure your money works for you for as long as you need it? How do you create a sustainable retirement plan and make the most of the new flexible income options?
Retirement, therefore, needs some planning. With the average 65 yr old man expected to live another 21.4 years and the average woman, 23.9 years, this is becoming a very significant stage in life. And these figures are just averages – ie: as many as 1 in every 2 people will live even longer.
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Guaranteed Income for Life
Level Income vs. Escalating Income
Drawing Down An Income
Setting Up A Plan
Questions to Ask Yourself
How much do you need to actually live on? The basics of course, but also those hobbies and small luxuries that make life a bit more fun…
What are your plans? Do you want to treat yourself and then settle down to a routine, or are you considering something more ambitious?
What other assets do you have that could assist your income plans, either now or in future? What is the situation with your mortgage and do you carry any other debts?
Do you want to make contingency plans? For the possibility of having to pay care fees, or for Inheritance Tax and other complications in passing on assets to loved ones?
Given the inability to make any accurate guess over your individual life expectancy, can you do anything to guard against the possibility of outliving your money?
The answers you come up with will at least start you on your way. At the very least, you will begin to understand what you really want to do and where you might need to think again.
Single Life Versus Joint Life
A single life annuity pays you an income for the rest of your life but then stops and will pay nothing more after death. If you are married or in a civil partnership, this could mean you risk leaving you partner without income in the event that you die first.
If this is the case, you may prefer a joint life annuity. This will keep paying out at least a percentage of the income if they live longer than you do. This percentage can range from perhaps 25% to 100% and will ensure that they can rely on at least some income even if you are no longer there to provide it yourself.
There is no doubt that income drawdown can be a complicated area of financial planning and one where a bit of professional help can prevent you making some potentially costly mistakes. At A&J Wealth, we have both the experience of the market and of the investment options availbale to help you avoid these mistakes and set yourself up for the comfortable retirement you deserve.
Consequently, if this is an area of interest for you, or you are simply looking to ask questions about it, please do not hesitate to get in touch.
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