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Empower Wealth Blog post by Empower Wealth

Control your retirement income

When you retire, there are different financial factors to consider because you are no longer receiving income from employment. Adverse market movements can have a greater impact on your savings in retirement because you’re not replenishing your savings with a regular pay cheque. Additionally, when you’re employed your income generally increases to keep pace with inflation. However, in retirement, inflation can erode the purchasing power of your savings.

At the same time, thanks to medical advancements and healthier lifestyles, you could enjoy a retirement period upwards of 30 years. This is a long time to make your savings last. Therefore, the decisions you make about investing your retirement funds are critical for making sure those funds last as long as you do.

Fortunately, there is a way to guarantee a level of secure, regular income throughout your retirement. An annuity pays you a guaranteed secure income that can keep pace with inflation, if you choose. The income is generally tax free if you’re over 60 and investing your superannuation money. Some annuities may also help you access or increase your seniors benefits like the age pension and the Commonwealth Seniors Health Card.

An annuity is a secure investment that provides you with a series of regular payments, either for a chosen term or for your lifetime, in return for a lump-sum investment. It can be used with other retirement investments, like account-based pensions, to set you up with a dependable income that can last throughout your retirement.

Term annuities have fixed start and end dates that are typically chosen by you. The minimum term is one year and maximum term is 50 years. Annuity payments are for the duration of the term and stop at the end of the term.

Lifetime annuities provide regular payments for the rest of your life. If you choose, the payments may continue for the lifetime of a second person after you pass away. Lifetime annuities can help alleviate the worry that you will outlive your retirement savings.

An annuity works like a pay cheque in retirement. You invest some of your savings with a financial institution who then holds your money while paying you guaranteed regular payments. This income is generally tax free if you are over 60 years of age and are investing your superannuation money. The payments can be made monthly, quarterly, half yearly or yearly.

It is important to note that annuities are designed to be held to term. If you would like to withdraw your annuity, in most cases you will receive a return of your investment but you may receive back less than you invested originally and less than you would have received had you held the annuity for its agreed term.

To find out more about how an annuity can help you in retirement, speak to your financial planner.

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