When you are planning for your future numerous options come to the front of your eyes. You are going to save money for your retirement or invest it. You want a stable income after your retirement or want to play or take risks and earn more money. The dilemma between high risk and getting more in return or stability can be confusing for some people or opting for both methods also becomes an option.
Let’s begin with two major retirement solutions one is annuity and the second is drawdown.
Annuity a solution to your retirement income
An annuity in simple terms is a type of income that you pay from a pension pot and you will get income from it, it will continue until you die.
It is a product that provides you with a fixed income, guaranteed by the provider ( it is usually an insurance corporation ) for getting fixed income from the provider, you provide them money the start from your pension pot. This money will become your source of income until the day you die. You may perhaps think that they will only pay the amount you have given to them. Don’t worry even if you live a long life they will still give you an income, more than your principal amount ( sometimes you will get more than you have given to them).
Now the next question is what kind of annuities are there?
There are multiple types of annuities such as that will provide fixed income, some can provide income that will gradually increase with time. The increasing amount is designed for inflation. There is an option for the couple where both jointly get the income. There is an option called enhanced annuity which is for those who have multiple health issues in general.
Ordinary income tax you have to pay for the annuity.
Drawdown similar notion of loss and profit
This time of products provides the opportunity for you to invest your money. It’s quite similar to investing in it the stock market. It is a flexible form of money where according to your choice and need you can draw high or low amounts of money.
The amount you take out, for that you have to pay basic income tax. But the great thing about these is that if you leave the planet after your departure the amount will be transferred to your successors without any tax.
This is quite flexible as you can invest your retirement funds here and later with a change of heart you can go for an annuity.
Deciding can be overwhelming for you to go for an annuity or drawdown. This concept is quite easy if you are looking for flexible money where you can withdraw according to your choice then drawdown is you destination. if you are looking for stability then going for annuity will be best. Some opt for both options as well.
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