Many people today are concerned with the planning of their financial future. It is important that you have financial stability when you are ready for retirement and that you are completely prepared to live out the rest of your days comfortably. Understanding retirement income, as well as retirement investments, can be a bit confusing though. One concept you may run into when preparing is known as income drawdown. Income drawdown can seem quite similar and be confused with an annuity. You should have a solid grasp of the differences between the two and know how they work together for your future income.
Your retirement plans need to be thought through very thoroughly. The first step to preparing for your retirement is to speak to a financial professional. They can really help you to understand everything you need to be doing as well as helping you to determine which sort of investments are right for you. There are many, many things you will need to consider and nothing can replace professional advice when it comes to your money.
Income Drawdown And Retirement Considerations
Among the many factors, you need to consider when preparing are things like how much income you will require after your retirement. Do you want to keep control of your residual assets? Know-how and know when you want to take your income. Income drawdown ties in closely with these factors because it is a method of controlling these assets and income.
What Is Income Drawdown?
Income drawdown is a mechanism for control that allows for a certain level of flexibility when establishing your retirement income. The way that most people engage in income drawdown is by purchasing a special annuity. Income drawdown is not necessarily an annuity, but an annuity is the most common way that income drawdown is practiced and utilized.
Income Drawdown and Annuities
When you buy an annuity you are basically using an amount of money you have accrued in your retirement fund in order to buy your income after retirement. Once you spend this money on the annuity you cannot get it back again, but you will be receiving it as income after your retirement through income drawdown. You are essentially paying for your own income. Income drawdown is how you establish the amount of retirement income you want from that annuity you purchased. It is the when and how much income you receive after you retire from work.
Income drawdown is suitable for anyone that is fine with a fair amount of investment risk and the potential for large gains and a hefty retirement fund. It is also great for anyone that has a large pension. There are no guarantees regarding the size of your gains and you may not make any gains at all, but you may end up with a higher retirement income than if you purchased a regular annuity. Income drawdown is a great way to maintain control while allowing for some flexibility with your retirement needs as well.