How to create safe income in retirement

Описание: How to create safe income in retirement? - this is the question I most often get from clients.

The answer is to create an income stream mixture of pensions and annuities and you are increases your chances of your financial security for the duration of your life.

Annuities are a perfect way to hedge your investment portfolio against market volatility.

Annuities are just about the only true guaranteed investment in Australia. As much as I love investing into growth assets, as this is the only way to grow your nest egg over-time. In retirement however you have to find the balance, or a sweet spot between growth and security, therefore you should not have all your money in growth assets alone. Remember GFC? Remember Covid? After the Global Financial Crisis in 2007 it took some assets longer than 10 years to return to the pre-GFC values, you really don’t want for this to happen to your savings during retirement.

Covid was different as the market rebalanced really fast, but as I explained in my videos then, Covid was a medical pandemic, not a financial crisis, hence fast market recovery.

Annuities stayed unaffected over those disasters, paying the agreed level of income to annuitants, so the income stayed unchanged, and this is the reason why we can see annuities as a form of reducing financial risk with our savings.

Annuities are a secure, pre-calculated income stream that does not rely on the market returns to provide you income for your life

When applying for an annuity, you will first receive a quote that will show you what your income will look like year after year for as long as you are alive. So there are no surprises, you can organise your budget accordingly with the level of income you receive.

Annuities can be set up for the investment term of your choice

Annuities can virtually be set up for a chosen investment time-frame, however if one of your goals is maximising Age Pension payments, then we are talking about the life-time annuities.

Annuities can continue for the life of your spouse.

The trick with annuities to get the best benefit is to know how much to invest into this income stream to gain the highest benefit, but also to leave sufficient balance outside of the annuity for other reasons. The other trick is to know if it is better to start an annuity on your name or your spouse’s name, as terms might be different, mainly due to different life expectancy between you two.

You can also commence an annuity with a reversionary beneficiary, meaning that the annuity payments will not only continue for the duration of your life, but for the duration for life of f your spouses , and that is a great deal of income security.

Annuities can assist with maximising your Age Pension benefit

Because lifetime annuities are partially income and assets exempt under the Centrelink means testing, they can assist with improving the level of Age Pension you are receiving, or can assist those retirees with assets just over the limit to become eligible for some Age Pension benefit plus the very special Pensioner Concession Card.

Annuities can assist in increasing the value of your estate

This is the point that surprises everyone. Most people think that annuities decrease the value of the estate, while often the opposite is true, when running a comparison between the income stream coming from account-based pension alone, as opposed to a combination of account based pension and annuity.

Video mentioned:
Annuities and your Retirement -    • Annuities and your Retirement  
Lifetime Annuities and Aged Care Annuities -    • Lifetime Annuities and Aged Care Annuities  
Account Based Pension and Annuity – which one is better    • Account based pension or annuity – which i...  

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Katherine Isbrandt of About Retirement
Website: https://aboutretirement.com.au/
Email: [email protected]

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