Gentlemen! It was a wild party my farewell party I even took them all home – I should have known better! I remember leaving the bathroom and trying to go downstairs to find Gerald (Carefree Retirement) passed out on the stairs. To make matters worse, he dialed it back so he wouldn’t get up or down, but walk tirelessly up the stairs all evening! But I think what everyone remembers about that night, besides Hillary falling in the bathtub, is the announcement that I retired before I bought my pension. The next two weeks were very stressful, I can tell you that; If I had read it, everything would have been completely different…
. If you get it wrong, it can be difficult or almost impossible to change it later. Therefore, it is important to make a well-thought-out decision in order to have the best possible income in old age.
What is the year of the year?
You can usually buy an annuity in retirement (although it is not compulsory, there are other options) if you have saved in a defined contribution or pension plan. Direct contributions replace the part of your salary that you no longer receive. An annuity gives you a guaranteed income for life and usually some or all of your pension money. Annuity income is paid to you (usually monthly) and is subject to income tax like your salary.
As you can imagine, there are many things to consider when buying an annuity:
As you approach retirement, your pension provider will usually make a retirement offer. However, you have a legal right to buy (so-called “free market choice”); Make sure you do this – as with all financial matters, you’ll often find significant differences between the different deals offered by companies. Before you retire, your pension provider will send you a letter with the value of your money – you should use this value when comparing pension offers.
In addition to regular sales, you should definitely not underestimate what your dealer has to offer. Some apartments, especially older ones, offer an estimated one-year warranty (Carefree Retirement). The guaranteed rate (as opposed to the onomatopoeic term for mink mating) may be slightly higher than those available on the open market, especially as average retirement incomes have fallen significantly in recent years. few years.
Change. You can receive a pension from the age of 55; However, you do not have to retire when you receive a pension. Generally, the earlier you buy an annuity, the less money you get because the company thinks it should pay you over the long term.
Individual or collective? If you have purchased an annuity, you will usually designate an income to be paid out while you are still alive (single); or, if your partner dies, for the rest of your (Carefree Retirement) life. It should be noted that although the joint pension payment is lower than the special pension payment (as for younger people the service expects the joint pension to pay longer), your spouse/partner will not lose income from the tax year if they survive you. There is also a third option: an annuity that continues to pay income at a reduced rate after the first death. It can strike a balance between ensuring your dependents still have an income (however small) while you’re away, but also slightly higher pensions compared to a standard lump sum.
warranty period. Another option to consider is whether to guarantee a pension payment for a certain period of time. This is very confusing from the approved rate of the year! Instead, a guaranteed term is a shorter period of time in which the annuity is paid (usually 5 or 10 years), even if you die during that period. Yes, after that initial guaranteed period (yikes!) you will continue to receive your annuity, even though your assets will not be your annuity if you die after that period.
proportional/increased pension. You can choose an annuity that pays a fixed income over a period of a year or a progressive income that can increase gradually (Carefree Retirement) or based on inflation. It is important to note that basic annuities pay a higher amount in the early years (although the actual value of the income may be reduced by inflation), but more annuity payments in old age. While you may not see the price as a big deal at the moment, it can make a big difference in your future earnings.You can also opt for a combination of defined benefits and lump sum pensions, so consider all options carefully before making a decision. Mutual funds can also be an option if you want to reduce your exposure to inflation. However, like any investment there are risks involved, so be sure to seek independent financial advice if you want to go down this route.
When receiving a pension, you have the option of using part of the pension (up to 25%) in the form of tax-free cash flow (so-called initial pension amount for those of you who like technical terms!). Remember that any amount you take out of your annuity will reduce the amount of money you get to buy the annuity. If you have any doubts about choosing any of these remedies, you should seek professional advice.
Another unknown thing worth mentioning here is the awesome name Little Changes. No, this is not a long-forgotten board game that requires players to answer questions to get to work on time; Instead, it refers to a rule that allows you to take your entire pension as a lump sum if it’s below a minimum threshold (currently 1% of your living wage, or £18,000 for you and me). It is important to note that only the first 25% is tax-free, the rest is subject to income tax.
So what affects the amount of income my pension pays?
Some, but not all, provide annuities that base the amount they pay on certain items. It includes:
Your health. If you have or have had health problems in the past, you may be able to get an extra year. These are usually more than normal years, unless (sorry, but that’s the reason) they don’t pay for a long time. On the other hand, it can also be a reason not to start talking about a return quickly if you can avoid it – if your health is bad in later life and you have a proper pension after buying it, you won’t be able to do it. move to an enhanced pension.
your life. We all know that things like smoking or being overweight are bad for us. The same is true for people dealing with financial problems. Some offer you better prices. Gerald, for example, has a wooden leg, weighs 30 kilograms, and smokes 80 kilograms a day. He had a good pension and had a cabinet (wood) carved to hold a bottle of bourbon.