Drawing Down an Income
Drawing Down An Income
Retirement today is a much more flexible thing than was traditionally the case. Notwithstanding the fixed date on which we will each qualify for our State Pension, nothing now forces us to retire at a certain age. Indeed, some of us don’t necessarily want to retire at a set age.
And for the luckier ones amongst us, early retirement – or perhaps a switch from working for someone else to trying our hand at running our own business – is something we might want to try out well in advance of that rule of thumb age of 65.
Thankfully, along with that flexibility in retirement age comes a flexible product. Referred to as income drawdown – or more specifically as ‘flexi-access drawdown’ – it allows you to keep some or all of your pension fund invested while you draw an income from it. An income that you are able to set and which you can change each year if your income requirements demand.
Now, before we go on, drawdown is not for everyone. Unlike an annuity, there are no guarantees. The fact your fund remains invested means it is subject to market and investment risk. And there is therefore no guarantee that any income you take form that investment can be guaranteed to last as long as you do. There are ways to increase – or decrease the chances of it happening but you will never be able to be completely sure.
Income drawdown is therefore seen as suitable only for those who can accept such risk and have the capacity to suffer at least some level of loss should markets turn against them. This might include you if you, for example:
- have a significant sized pension fund compared with your actual income needs
- have more than one source of income you can benefit from
- have a guaranteed income being paid from elsewhere already, perhaps a defined benefit scheme
- have a significant estate and/or inheritance tax issue (within which income drawdown might – currently – play a key role)
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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