Choosing an annuity when you near retirement can be difficult. It’s important that you make the right decision. There are different annuities that you can choose from. Watch this video to learn about the living annuity.

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Understanding a Living Annuity

A living annuity is a retirement investment product that provides individuals with a regular income stream during their retirement years. It is a popular choice for many retirees due to its flexibility and potential for growth. However, it is important for individuals to understand how a living annuity works and the various factors that can impact its performance.

One of the key features of a living annuity is that it allows individuals to choose their own investment strategy. This means that retirees have the freedom to decide how their funds are invested, based on their risk tolerance and financial goals. They have the option to invest in a combination of assets such as equities, bonds, and cash, which can potentially lead to higher returns over the long term. However, it is essential for individuals to consider the level of risk associated with their chosen investment strategy, as market fluctuations can impact the value of their annuity.

Another important aspect of a living annuity is the income drawdown rate. This is the percentage of the total investment amount that individuals can withdraw as income each year. The drawdown rate can range from 2.5% to 17.5% annually, and individuals have the flexibility to adjust the rate based on their financial needs. However, it is crucial to strike a balance between withdrawing enough income to support one’s lifestyle and ensuring that the annuity lasts throughout retirement.

It is also important to be aware of the fees and charges associated with a living annuity. These can include administration fees, investment management fees, and advisor fees, which can impact the overall performance of the annuity. Individuals should carefully review the fee structure of their annuity and consider the impact on their investment returns.

Furthermore, individuals should be mindful of the impact of inflation on their living annuity income. As the cost of living rises over time, the purchasing power of a fixed income stream can diminish. Therefore, it is important for retirees to consider inflation and ensure that their annuity income keeps pace with rising expenses.

In conclusion, a living annuity can be a valuable retirement investment product that offers flexibility and potential for growth. However, individuals need to have a good understanding of how it works and the various factors that can impact its performance. By carefully considering their investment strategy, drawdown rate, fees, and inflation, retirees can make informed decisions about their living annuity and enjoy a secure and comfortable retirement.