There are many crucial decisions that need to be made at retirement, many of which are interconnected and have bearing on your financial future.
Retirement brings an inevitable wave of anxiety that can be amplified by the number of crucial decisions that need to be made at this juncture – many of which are intricately interconnected and have enormous bearing on one’s financial future.
Generally speaking, a retirement annuity investor can retire from age 55 onwards, although there is no age limit at which retirement should take place. As such, deciding when to retire from a retirement annuity is a critical part of one’s overall retirement and estate planning. Once you move your funds to a living annuity structure, legislation requires that you begin drawing down from your investment at a minimum of 2.5% per year, and this income is taxed at your marginal rate. As such, it is important to carefully analyse the impact of retiring from your retirement annuity will have on your overall plan to ensure that the timing is appropriate in terms of the broader plan.
Having an appropriately sized and easily accessible emergency fund in retirement is critical, and if you don’t have access to such a fund, making a cash withdrawal can be critical to your future financial security. A life annuity is, in essence, an insurance policy with a contractual obligation by the insurer to pay the policyholder a guaranteed income for life. Upon the policyholder’s death, the policy terminates, and the contractual obligations of the insurer come to an end, with there being no financial legacy for the policyholder’s heirs or beneficiaries.
A living annuity is a particularly useful estate planning tool in that the funds held in such a structure fall outside of the deceased estate and do not attract estate duty. Upon the death of the annuitant, the remaining capital will be distributed to the beneficiaries nominated on the investment.
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