A retirement annuity plan is a proactive long term savings plan for your retirement.
A retirement annuity is a saving-wise option worth considering as you learn to invest money and broaden your financial education.
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RETIREMENT ANNUITY PLAN - OPTIONS SIMPLIFIED
A retirement annuity:
* is a long term savings vehicle for your retirement
* you build up capital throughout your income earning years so that you will receive an annuity (monthly income on a regular basis) when you retire
* and you can the reduce the income tax that you pay now because you invest "before tax money"
* but remember - you only defer (put off) paying tax until you retire
* also remember: there are legal restrictions on withdrawing funds from your retirement annuity until the age of 55
(to recap - you pay no capital gains tax or income tax on your retirement annuity until you retire or the retirement annuity investment matures at age 55)
But when you retire with your retirement annuity plan:
* you may withdraw a third of the investment value as a lump sum (subject to certain tax restrictions)
* and the remaining two thirds must be used to buy an annuity that will give you a regular monthly pension until you die
* NB - you don't need to buy the annuity with the company that you bought the original retirement annuity from
* so , shop around for the best deal and return on your investment
Why a retirement annuity is worth considering:
* you can add life assurance and disability cover to your retirement annuity
* it is a good option if you are self employed because you get the same tax benefit as employed people who are part of a group retirement fund that their employer offers)
* it is not considered part of your estate if you die insolvent - so your money will not go to your creditors
* you can keep your retirement savings when you change jobs
* it is a disciplined form of saving because you can't dip into the funds or loan against your savings before the age of 55
(you can keep your money in the retirement annuity fund until the age of 69 - but no longer - and then you have to use the money to draw a pension)
* your retirement annuity plan is generally managed by a life assurance company
* because it is a long term growth investment option, a retirement annuity is less susceptible to market ups and downs
* your consistent monthly contributions over a long period of time average out short term market highs and lows
*compound growth allows you to earn interest on the interest that you make as a return on your investment
* it can be a flexible investment where you choose the underlying investment
* and it allows for a diversified portfolio because your retirement annuity can be exposed to a number of different asset classes (offshore savings, property, equity)
* retirement annuities are generally taken out with a contract period that matures at age 55
* why - if you select the age 55 option you have more flexibility and choice so you can ...
* either choose to carry on with your retirement annuity until age 65 or 69
* or you can allow it to mature
* if you commit to the age 65 or 69 years old option then you have no flexibility (you will have no option to withdraw money should the need arise)
Two main types of annuities:
* compulsory purchase annuities - must be bought with the two thirds of the benefits that you got form your investment so that you can buy a monthly pension for the rest of your life
* voluntary purchase annuities - you may choose to invest in an annuity of your choice;
* for example: with profit annuities; level annuities; inflation linked annuities; deferred annuities; living annuities; guaranteed annuities; joint and surviving annuities
* you can invest a lump sum and then draw a regular income from it
* and it can be for a specific time period (say ten years) or for the rest of your life until you die
Your retirement annuity plan is an important part of your retirement saving plan.
Be informed and make saving wise investment choices for your financial future.