What are annuities, and how can they help in retirement?

Like most people today, retirees and those nearing retirement are increasingly worried about paying their regular bills as the cost of living rises and money gets a bit tighter.

If peace of mind in retirement is one of your key goals, an annuity product could be worth considering as it can provide a guaranteed income to cover your regular expenses like rates and insurance.

With the basics taken care of, it can be a lot easier to manage your remaining income from the Age Pension and/or a superannuation pension at a time when the financial world is increasingly uncertain.

Despite being a sensible solution if you have a medium-sized retirement nest egg, annuities remain largely unknown and underutilised. So it’s worth learning a little more about their pros and cons.

What are annuities?

In simple terms, an annuity allows you to convert some of your retirement savings or investment capital into a regular income stream to help fund your retirement.

Depending on the type of annuity you purchase, they can be used to provide guaranteed regular payments for either a fixed term of your choice, or for the rest of your life.

With investment market volatility once again an issue for retirees, annuities could provide a useful solution. One of their key benefits is they provide a guaranteed income, regardless of how investment markets are performing. The payment you receive is locked in when you purchase the annuity and remains the same regardless of what happens with investment returns.

If you like the idea of receiving a regular pay cheque in return for investing a lump sum during your retirement, an annuity could be a sensible choice to explore.