subject: Getting a Steady Income After Retirement [print this page] Getting a Steady Income After Retirement Getting a Steady Income After Retirement
Some people cannot wait till retirement. The prospect of taking a break after 40 years of working is very tempting indeed. Everybody envisions sitting out on the backyard porch sipping tea, working on our rose bush and other non-stressful activities.
Unfortunately, this is only half the story. Admittedly, retirees do enjoy non-stressful activities. However, there are also matters that affect them because retirees do not have a steady stream of income if they do not make plans for it. Ideally, there should be some form of forced savings while there is a steady stream of income. When they retire, they can draw on this form of savings to allow them to continue with a comfortable lifestyle.
Now what would happen if your personal forced savings is insufficient by the time you retire? We can always fall back on our pension scheme, if that is available. There are many ways to make use of our pension scheme. One of this is to convert it to an annuity plan.
An annuity is a product offered by an institution whereby you will give the institution a sum of money in one-lump sum or over a period of time. In exchange, the institution will provide you with a steady stream of income from a future date onwards. The size of the income depends on the size of your initial investment. On top of that, the best annuity rates and the different types of annuities available will also affect your eventual income.
When you reach retirement age, there will be a slew of decisions to make. All of them is related to having a comfortable life after you have left the working force and do not have a steady stream of income. The pension scheme that you have been saving up all those years is now available for you to use. This is typically converted to an annuity. However, which institution will give you the best annuity rates? What amount will be needed in order to give you a comfortable lifestyle? How much risk should you take with your annuity?
There are a few types of annuities. The different types of annuities affect the timing of the payout, the investment type of the annuity and payouts related to health and death.
First, the decision needs to be made whether you want to receive payments from the institution immediately or at a later date upon investing. If you opt to receive payments immediately, the payments will be given once you start investing. Depending on the annuity rate, this will affect the sum that you will be receiving. If you opt to receive payments at a later stage, the payments may be higher.
Next you can decide whether to invest in a fixed or variable annuity. Having a fixed variable will lower your risk while at the same time having a lower return. This is because the annuity is fixed at a specified rate regardless of external factors such as inflation and government regulations. In having a variable annuity, you will be getting a higher return although you will be exposed to a higher element of risk. Variable annuities are mostly linked to various sources including the stock exchange. If the stock exchange performs well, you will invariably get a higher return. However, this is true if the reverse should happen.
In order to obtain the best annuity rates, a lot of decisions need to be made including selecting the correct institution. Nevertheless, you should take advantage of the pension scheme that is already available and use the money and let it provide you with a comfortable lifestyle as it was meant to be.
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