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Declining incomes and a rising cost of living have led to pensioners in particular being hit hard by the current economic climate and, with winter fast approaching, things seem set to get worse before they get better.
Despite a slight recovery, pension incomes and annuity rates still remain relatively low. This means that even if you’ve managed to store away some of your cash and earnings, you may still struggle to make ends meet.
A Lack Of Knowledge
As part of this, the problem is compounded by a lack of knowledge on the types of income available, and such a lack of knowledge means that many people do not get the best deal for them and this only hinders their retirement plans further.
Two Mistakes People Make
There are two mistakes that many people tend to make. Firstly, many people assume that the offer from the pension company they have been saving with is the best. This is far from the case and although the offer will be competitive, it probably will not be the best. Instead, people should look to open market options that allow you to compare rates and find the best deal. Open market options are available locally and there will almost certainly be an independent advisor near you. Local advisors such as Pensions and Wealth Management Services can be found in an instant, and local companies will have the best knowledge of the services and rates available in your area.
The second mistake that people make is to choose the wrong option to begin with, thus leaving themselves and their dependents out of pocket. At present, the majority of annuities taken out are single life annuities yet a large propotion of people are married. As a result, hundreds of thousands of pensioners could potentially leave their partner penniless as this income will stop immediately upon the death of a policy holder. The difference between a single life or a joint life annuity could be minimal in cost but could potentially have a huge impact on your retirement. Due to this, you have to know the market well.
Six Decisions to Make
When you’re considering pensions and annuities, you have six decisions to make:
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- What type of annuity is best for you and/ or your family?
- Do any of your health and/ or lifestyle factors allow you to apply for a specialist or enhanced annuity?
- Do you want a single or a joint annuity?
- How often would you like your pension to be paid?
- Would you prefer level payments (the same throughout your contributions) or an escalating payment structure (the older you get the higher proportion of your wage you pay)?
Always remember that you could have to make your annuity income last for 25 years or more so, for this reason, it is important that you carefully consider your decision. If you plan carefully, you should have no problems enjoying your retirement.
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