One of the most common queries that I have from new retirees’ is “how will my retirement income be paid to me?”.
Given there are a number of retirement income streams that are available, and each of these has their own nuances, the answer will vary depending on the strategy that is agreed upon for each individual situation.
The regularity of income can depend on what you have been used to throughout your working life, and also what plans you have for your retirement. It can also depend on whether you will be entitled to any CentreLink income support (e.g. the Age Pension) – as this is paid on a fortnightly basis. Most employees have their income paid on a fortnightly basis, and would like for this to continue in retirement. Some people are used to a monthly income and are quite comfortable with this continuing. There can be instances where larger utilities bills come in on a regular quarterly basis, and so income streams can be set up to pay a larger amount each quarter to allow for the payment of these utilities.
The most common retirement income stream that we use is an Account-based Pension (or Allocated Pension). This investment is established using superannuation and if you are over age 60 will provide you with tax-free income, and no tax on the investment earnings. Account-based Pensions can have income paid fortnightly, monthly, quarterly, half yearly or annually depending on the provider that you use and what you are wanting to achieve. Most of my retiree clients with Account-based Pensions have income paid either fortnightly or monthly as it is one of their primary sources of regular cash flow.
Account-based Pensions paid on a regular basis also complement any Age Pension that you might be receiving – the combination of which often meets the necessary living expense requirements for many of my retiree clients.
Another retirement income option can be an Annuity. This is a fixed term, fixed income investment. In many instances annuities have been established with income paid on a quarterly, or even annual, basis to cover those “big ticket” bills that come in – electricity, water, council rates and the like. Often my retiree clients have this lump sum payment come in on an annual basis in anticipation of using the funds for travel and the like.
There is no one right retirement income stream to suit everyone, it depends on your own individual circumstances. As part of discussing your retirement, your Goldsborough Financial Services adviser will talk through the options that are available for you.