What to Consider While Purchasing an Annuity
What to Consider While Purchasing an Annuity
Purchasing an annuity as part of your retirement plan is one of the most sensible decisions you could make. However, it is a big decision, one that impacts your entire life after employment. In order to ensure your retirement is blissful and hassle-free, you need to think through a pension annuity in considerable detail. While many will scout for the best annuity rates, that alone will not guarantee a financial secure and independent retirement, you will need to take these factors into consideration:
Do you have any dependents?
Dependents generally mean children or a spouse/civil partner who depends on your livelihood. If you have dependents going into your retirement, you may want to consider a joint life annuity that will provide even after you die. It is important however to check what 'dependents' are covered by your specific annuity, some do not consider anyone other than spouse or civil partners.
1.Do you have any chronic illness that could affect your lifespan?
If you do, then you may qualify for enhanced life annuity, which pay out income at higher than normal annuity rates. This will come in very handy if you believe you will be in and out of hospitals or incurring any other medical expenditure.
2.Is your fund made up of national insurance rebates or state pension?
If your pension came out of rebates from national insurance, then you need to buy a 50% pension for your spouse as well. If it came out of state pension, you will need to purchase a protected rights annuity, which entitles you to certain benefits. If either of these conditions apply to you, ensure you speak to a private financial advisor, or at least the annuity providers to understand what kind of annuity rates you stand to get.
3.Do you routinely invest in stocks, or follow the market?
If you do, you may want to look into investment-linked annuities that are not wholly dependent on annuity rates. These annuities can make you extra income since they are invested in stocks or shares. If you have a good understanding of the market, you could choose to have the pension linked to your own mutual fund investment, or you could link it to the provider's mutual fund. However, you need to understand that you could face losses too, when the market is down.
4.Are your savings well planned or do you usually find yourself strapped for cash at the end of the month?
If your savings are considerable, you could possibly be able to manage well even through inflation. However, if you believe financial planning is not your strong suit, an escalation annuity would be a better option, as it increases your income in proportion with rising inflation.
Each of these questions will help you in determining the options you should choose when purchasing an annuity. Thinking through this decision is best when you have the help of a website that works as a broker to help you find the best annuity rates and compare them to others. It will also help you figure out how much income you are likely to get and what you should opt for. So plan well and consider a website that helps you when you consider annuities.
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