Many of us envision having enough money to live well in retirement.
A life annuity is one type of financial product that offers freedom from worry and peace of mind.
To sufficiently plan and prepare, you should plan for your retirement as early as possible by ensuring you contribute sufficiently to your retirement savings, or supplement this by investing in a retirement annuity.
Try to decide what you will do with your retirement benefit at least three to five years prior to your retirement date to allow you to source more information about the retirement options available to you.
A life annuity is where you take your lump sum or your two-thirds retirement savings in exchange for a series of guaranteed income payments for life from an insurance company.
Annuities can be a valuable tool in financial planning when used correctly.
It functions as a ‘guaranteed paycheck’ for the rest of your life, providing financial security, particularly in retirement.
Life annuities offer several significant advantages that make them an appealing alternative for people wishing to protect their retirement or build a consistent income stream:
- Financial Security for Life: The most significant benefit is that you will not outlive your income.
Once you purchase an annuity, you are guaranteed to receive regular payments for the rest of your life.
This is particularly useful in today’s environment, as life expectancy is increasing.
Furthermore, you can also add your spouse, therefore, if you as the annuitant passes away, the surviving spouse continues to receive payments for life.
- Predictability: Knowing how much money you’ll receive each month with a life annuity provides peace of mind.
- It provides a consistent income stream that does not change with market conditions, which is a key issue for people who rely on investments
- Protection Against Inflation: Some life annuities come with inflation protection options.
- This means the payments can increase with a specified percentage over time to keep pace with inflation, helping you maintain your purchasing power in the future.
Life annuities aren’t for everyone, but they’re a great option for people who want to ensure a steady income stream throughout their life.
The ideal people are typically:
- Retirees: A life annuity can help you plan and assist you to cover your ongoing expenses.
It ensures that you have a set income after you stop working, allowing you to enjoy your golden years without worry or fear.
- Risk-averse people: People who are nervous about market fluctuations or outliving their savings may find life annuities appealing.
The fixed nature of annuity payments means you don’t have to worry about stock market crashes or bad investment years.
- People with Longevity Concerns: If you’re in good health or come from a family with a history of long life, a life annuity may be especially valuable. It ensures that, regardless of how long you live, your income continues.
Life annuities are for anyone seeking to secure a steady income stream in retirement.
They offer financial peace of mind, predictability and protection against outliving your savings.
If you’re looking for a way to ensure your golden years are truly worry free, a life annuity could be an excellent option to consider.
Of course, life annuities aren’t one size fits all, and it’s essential to weigh the pros and cons, and consider your own personal financial goals.
By speaking with a trusted financial adviser, you can determine if this is right for you and take a step toward securing your future.
- Andreas Shipanga is the Old Mutual Namibia corporate sales consultant in the corporate segment.
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