Retirement is that time that you may have looked forward to for a long time but how do you put a retirement income plan in place that can reduce your money worries? Look at our checklist to find out

There are many options when it comes to retirement plans. These options can include conventional annuities, enhanced annuities, immediate life annuities, immediate needs annuities, unit-linked annuities, with profits annuities, and income drawdowns. 

So as you can see there are many different options to choose from, which can be confusing and may require a little assistance from a professional. Below you will find the basics on a few of the most common annuities:

Conventional annuities

A conventional annuity is designed in a way that you are paid an income for the rest of your life. How you acquire this conventional annuity is from the money in your pension fund. The money that is paid from the annuity will be fixed right at the beginning, which means it won't be affected by stock markets or any other investments. No matter how long you live your income will not decrease, but will stay the same for the remainder of your life. 

But the confusing aspect of conventional annuities is the number of options available. Below are the options that you are presented with when going with a conventional annuity:

Single life annuity:  This one provides you with a higher income because it doesn't provide a dependent pension.
Joint life annuity:  After you die, this annuity will continue to make payments to your dependent.
Guaranteed annuity:  A good reason to choose this option is if you want a guarantee that the annuity is going to pay your dependent after you die. There is usually a fixed period of 5-10 years in which the dependent will receive the payments.
A level annuity:  This annuity continues to pay the same amount of income every year.
An escalating annuity:  An escalating annuity allows for your income to increase every year. This increase can happen at a fixed rate or it can increase in relation to inflation.

The great thing about a conventional annuity is that you can customise it to suit your needs. You have an influence over whether or not your dependent continues to receive an income after you die, how much income you receive, and protect your income against the throes of inflation.

Enhanced annuities

An enhanced annuity is also called an impaired life annuity and provides you with a guaranteed income for the remainder of your life. These annuities tend to pay a higher income because of previous or existing medical conditions that you may have. How you purchase an enhanced annuity is through the money from your pension fund.

What's great about enhanced annuities is that certain conditions such as heart attack, stroke, cancer, asthma, diabetes and high blood pressure may be covered. Even if your health improves, you will not lose any income, so this definitely makes these annuities worth looking into.

Immediate life annuity

An immediate life annuity is another type of annuity that guarantees you an income for the rest of your life. Where the conventional and enhanced annuities are bought by the funds within your pension, an immediate life annuity can be bought with money other than money from a pension fund. You can use a savings account, money that you have inherited from another family member, or you can use the money from your pension if you wish. Luckily, only some, not all, of the income from an immediate life annuity is subject to income tax.

Immediate needs annuity

An immediate needs annuity can assist in the costs of care in the case that you must be placed within a care home. You are also guaranteed an income for the rest of your life. Just like an immediate life annuity, you can purchase the immediate needs annuity with your own money. You can also make arrangements for payments to automatically be made to your care provider tax-free.

More options

Yes, there are more annuity options available when figuring out what sort of retirement plan is a fit for you. You can more or less count on your annuity paying you an income for the rest of your life and, depending on the annuity you can either buy it with pension funds or with your own money to ensure that you and/or your family are financially secure after retirement and sometimes after death.

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