Planning for retirement can feel overwhelming, but securing a reliable source of income is crucial to ensure financial stability. One option that many Australians consider is an annuity. But what exactly is an annuity, and how can it help you during retirement?
What is an Annuity?
An annuity is a financial product designed to provide a regular stream of income. Essentially, you invest money into an annuity either as a lump sum or through regular contributions- and in return, receive scheduled payments in the future. These payments can continue for a set period or for the rest of your life, offering peace of mind and financial predictability.
Types of Annuities
Understanding the different types of annuities can help you choose the one that best suits your retirement goals:
- Fixed Annuities: Provide guaranteed, regular payments at a fixed rate. This option is ideal for those seeking stability and certainty.
- Variable Annuities: Payments vary based on the performance of underlying investments. This allows for potential growth but comes with higher risk.
- Indexed Annuities: Returns are linked to a market index, such as the ASX 200, offering a balance between growth potential and security.
Benefits of Annuities
- Reliable income: Receive consistent payments, which can supplement other retirement savings.
- Longevity protection: Helps protect against outliving your savings by providing lifetime income options.
- Customisable options: Annuities can include features like guaranteed payments to beneficiaries.
Things to Consider
While annuities offer many benefits, it’s important to consider:
- Fees and charges that may apply
- Potentially lower returns compared to other investments
- Limited access to principal funds once income payments begin
Final Thoughts
Annuities can be a valuable tool in a comprehensive retirement plan, providing security and predictability. If you’re considering an annuity as part of your financial strategy, it’s important to seek professional advice to ensure it aligns with your retirement goals and overall financial situation.
At Certum Advisory, we guide our clients through their options, helping them make informed decisions to secure a financially confident future.
