|
Transition To Retirement With Certainty of Income |
|
Are you looking for an effective way to create a transition to retirement income where the
income doesn't fluctuate with share price movements? An annuity is worth considering.
| If you are 55 or over and want to access your super prior to retirement, an annuity can provide security and certainty as your regular income payments are guaranteed and will be unaffected by movements in investment markets.
There are certain features that a transition to retirement annuity must have, so you need to speak to your financial adviser to ensure you have the right product.
Case study
Fred, 56, and his wife Betty, 55, are both considering retiring in a few years. In the meantime, Fred would like to start reducing the hours he works to 20 hours a week as he'd like to start spending more time working in the garden.
A concern they both have is that Fred's reduced hours and salary will prevent them from taking their annual overseas holiday.
Their adviser suggests that they consider investing some of their super in a guaranteed annuity as part of their transition to retirement. Their adviser explains that they don't have to invest their entire super in the transition to retirement annuity, but only a portion that can generate enough income to help maintain a similar level of income to when Fred was working full-time. He explained that the income stream would not depend on movements in investment markets.
Understanding and acknowledging the non-commutable aspect of the guaranteed annuity, Fred and Betty decided to invest some of their super in an annuity to ‘top-up' Fred's part time salary. They are now focusing on planning their next overseas trip!
|
|
Key Point
People 55 and over who are still working full time may also benefit from another type of transition to retirement strategy. They can choose to salary sacrifice some of or all of their income into super (if their employer permits salary sacrifice and subject to contribution caps). At the same time they can convert their super into a transition to retirement annuity to supplement their income.
By implementing this strategy people may:
Reduce their personal income tax through salary sacrifice
Reduce the tax on investment earnings on the portion of uperannuation moved to the annuity
Receive a 15% rebate on the money paid from the annuity.
Before adopting a transition to retirement strategy you should speak to your financial adviser who can determine if this approach is right for you.
|
Acknowledgement: Strategies for uncertain times. Comminsure
|
Information 
