How to create safe income in retirement
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- เผยแพร่เมื่อ 22 ส.ค. 2023
- 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 Ret...
Lifetime Annuities and Aged Care Annuities - • Lifetime Annuities and...
Account Based Pension and Annuity - which one is better • Account based pension ...
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Thank you Katherine... Great info and the scenarios were particularly helpful.
Thanks Katherin, so good to know some of the choices available.
Thank you
Good information Katherine, thank you.
Glad it was helpful!
Roughly £120k in my portfolio are in tech/TSLA stocks, can I get an advice on any other stocks that I can acquire to diversify my reserve across multiple markets while creating a comprehensive portfolio allocation that balances my concerns of risk aversion and returns that meet yearly inflation.
I engage in various prolific Investments by compound interest & leveraging and as well operating with an Investment Professional Kayla Rodrigues, So far I've attained returns of over $72K last month
Is it still possible to setup annuities income at age 63? Your videos are very educational, have gained a lot of information watching them. Looking forward to our meeting at the end of October, which I hope to be sooner. If anyone cancells their booking,please let me know.
Thanks a lot!!
Timely topic, my FP will probably want to discuss this next meeting for sure 👌🏾
That's good, happy to hear that
Thank you for great information and advice, Katherine. I will further appreciate the enlightenment from you regarding a couple of points which might sound obvious (thus silly) to you but beneficial to me: 1/ Regarding annuities, what would happen to retirees' super balances once they (including spouses) passed away ? Will remaining balances be paid to retirees' will estates/beneficiaries ? 2/ Comparing with account-based income stream (noting all related conditions such as market return volatility, minimum withdrawal limits by ages, annual income needs), is there a "magic number" (meaning super balance level) whereby an account-based pension would be more beneficial than an annuity because long-term market returns (for a relatively high super balance) can both meet regular income needs and outweigh those benefits derived from annuities ? Thank you, Kathrine.
Thanks for another great video.
What are the risks with annuities?
What happens the company goes bankrupt etc?
Annuities are guaranteed and legislated by APRA, so much safer funds than any super fund. that does not mean there are no drawbacks, but this is subject to your conversation when you receive advice and your personalised quote, as it differs for each person.
@@AboutRetirementTV thanks 👍
Just found your channel and have subscribed. Thanks for all your wise advice. Is Defined benefit superannuation a type of annuities in Australia? I plan to retire in 5 years on my defined benefit pension. From my understanding I can only keep 50% of the defined benefit as pension and the rest can be taken as lump sum or invest into another pension. Would it be best to take the other half as lump sum and invest in blue chips share that pay dividends or invest in another pension?
Hi Gerard, this is a great question, unfortunately I am unable to answer, as it all depends on all other assets you have. I would need to gather information of your overall asset position and see the impact any type of investing would have on income, tax position and longevity of your savings. and each sceanrio could provide a different outcome. If possible, please organise a meeting for us via my website and then, we can have a chat what is the best scenario for your retirement: aboutretirement.com.au/
Katherine is there any way that we can print out the examples/scenarios that you have given?
Yet, did the government take $9,600 from my pension because all I did was invest money, yet anyone who put money in a treat could still receive the full pension. It gives you the true feeling of being used by the Labor government or any party. How do the back bench members feel about stealing from any avenue person. Do they really expect us to be treated in this situation.