Should your approach change once you’ve actually retired?
You’ve worked hard throughout your life to save for your retirement – with goals of maximising your super savings through careful investment choices and strategies to build your wealth. But once you retire and start drawing down on your investments, those goals will likely change.
When you are entering a new phase of your life and you are no longer receiving a regular income, it’s natural for your focus to shift to finding a source of reliable income and protecting what you have already built. Your investment goals may include, funding a comfortable retirement for yourself and perhaps leaving an inheritance to your children and grandchildren.
An annuity can help to achieve these goals by providing guaranteed income payments that are regular and dependable. It can help you cover your essential expenses and maintain your standard of living in retirement by acting as the foundation of your retirement plan.
Ensuring guaranteed income
Annuities are an increasingly attractive option for many Australians approaching their retirement, as they can give you an additional layer of protection in retirement above the Age Pension, by providing guaranteed income payments. They act as a safety net helping to ensure that you will receive income for a chosen term or your lifetime, regardless of how investment markets perform.
How it works is you invest a lump sum amount and in return you receive guaranteed income payments over a chosen term or for your lifetime.
There are different types of annuities:
- Term annuity – you choose how long and how often you’ll receive payments, from a minimum of one year up to a maximum term of up to 50 years.
- Lifetime annuity – provides guaranteed income payments for life.
Why use an annuity?
Unlike other types of investments, annuities aren’t impacted by market movements. Also, they can be linked to yearly changes to inflation, helping you to continue to afford tomorrow what you can afford today. You will continue to receive guaranteed income payments, regardless of how investment markets perform. The best part is, if you buy an annuity with super money after the age of 60, then the income you receive will be tax-free.
Annuities can allow greater flexibility in your portfolio as you’ll always have guaranteed income payments to take care of your essential needs, including groceries, bills and clothing. You might choose to combine your annuity with other retirement investments and sources of income, such as account-based pensions to fund your discretionary spending like entertainment and travel.
Seek help from an expert
When you’re preparing for retirement, your first port-of-call should be your financial adviser. They can help tailor a retirement plan to your individual circumstances and goals. By structuring and securing your finances for your unique situation, they can help you to you achieve your ideal retirement lifestyle today and into the future.
Contact your financial adviser to determine whether an annuity is right for you.