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Retirement Income Tour

The Retirement Income Tour has been developed to provide you with general information concerning income options for your retirement. The tour will provide you with:

basic definitions of the financial terms used in retirement income provision
an understanding of the general concepts you will need to be aware of before deciding what type of retirement income product suits your needs
an indication of the decisions you will need to make with your financial adviser prior to investing your retirement lump sum.

How will you spend your retirement?

If you’re nearing retirement, you’re probably looking forward to spending time with your family, pursuing new interests and hobbies, tackling the garden and wondering when you’re ever going to have the time to sit back and relax.

And when you do find the time to relax, the last thing you want to be worried about is money.

What are you superannuation options?

When you retire, you will have to decide what to do with your superannuation savings. Some options to consider includes:

leaving it in your superannuation account and making lump sum withdrawals as and when you need it. Note: These payments are tax-free if you are over age 60.
using some or all of the prceeds to purchase a personal rertirement income. Note: These payments are tax-free if you are over age 60

What is personal retirement income?

A personal retirement income is simply an investment which produces an income in retirement.

Even if you have a lump sum to invest you’ll probably need a regular cash flow to meet ongoing expenses - money which replaces the wage or salary you’ll no longer receive from your employer once you have retired.

What income level will you need?

You will need to work out the income you will require in retirement. Consider how long you can privately fund an income for you and your spouse, the lifestyle you want to lead and the living expenses necessary to meet your needs and maintain your lifestyle.

You may wish to draw a higher level of income in your early retirement years if you want to travel or enjoy additional leisure activities, and reduce that level in later years.

The level of income required will impact your choice of retirement income product and your investment choices.

What do you need to consider about security?

Many people see their retirement as a time when they cannot afford to invest in high risk investments. You will need to be comfortable about where your money will be invested and whether you are prepared to accept some income volatility in order to potentially increase your return, future income and the value of your capital.

You will also need to consider the following questions:
What level of income do you want?

How long do you want that income paid?
Do you want to retain the value of your original capital?
What rate of return do you want?
What regularity of income payment do you require?

Will you require income flexibility?

It may be important for you to have the ability to change your level of income. As your lifestyle or circumstances change, or as your living expenses increase with inflation, you may need to adjust your income payments to reflect these changes.

The solution for you may be a guaranteed income giving you set regular payments*, or a flexible income which you can change each year (subject to Government limits).

*Guaranteed Income products may be CPI/inflation linked

Will you want access to your funds?

Liquidity, or access to your funds, is another important issue to consider. Think about your future plans and whether you may need access to part or all of your investment.

Superannuation Pensions offer access to your capital, although it may be at the cost of future income.

Guaranteed Incomes do not generally provide easy access to capital. Term certain annuities or pensions can usually be converted to a lump sum if necessary, but there may be costs associated with doing this.

How long do you want your income to last?

Your money may need to last you 20 to 30 years in retirement. Today people generally have longer, healthier lives. This means that if you are thinking of retiring at age 60, you could spend at least one-quarter of your life in retirement. The first thing you will need to consider is how much you will need to support your desired retirement lifestyle.

Guaranteed Incomes provide greater certainty regarding the term of the income, whether it’s lifelong or for a fixed period. If you use flexible incomes, you will need to carefully manage your cash flow to ensure your money lasts.

How often do you wish to receive an income payment?

How often you wish to receive an income payment will depend on how comfortable you feel managing large sums of money over a period of time. You may prefer to receive your income payments fortnightly or monthly like your pre-retirement wage or salary, or you may prefer to receive payments quarterly, half-yearly or yearly.

Personal Pensions and Annuities generally give you a high degree of flexibility in the choice of income frequency.

What involvement do you want in investment decisions?

How much involvement in the management of your investment do you want to have? Would you prefer to have a set income and simply let it run, or do you wish to actively participate in ongoing investment decisions? Do you want the ability to review your investments and move them around as the market changes?

Guaranteed Incomes can be regarded as being a “set and forget” form of investment.

How do you manage your investments?

If you prefer to maintain a high level of involvement in your investment decisions, you may invest directly into property, shares or other forms of investments. These investments require a certain amount of administration and recording be undertaken to meet taxation and legislative requirements.

By investing in a Master Trust or using the services of a Trustee company, you can maintain control of the investment decisions but have the taxation, reporting and administration duties handled for you.

What other factors will you need to consider?

Inflation - it is important that your spending power doesn’t erode over time.

Impact of Government Pensions - if you qualify for assistance from Centrelink or Department of Veterans' Affairs, your investments can affect these benefits. As this can be complex, we recommend you seek professional advice from your financial planner.

Retirement is a long-term issue - you should remember that Retirement Income is a long term issue. Consider not only your immediate future but also your long term financial position. You will need to ensure that you make use of a reliable financial planning and investment organisation, such as AXA Australia, which will continue to assist in providing you with the services that are easy for you to understand throughout your retirement years.

The above is provided for information only. It does not constitute an offer or invitation to enter into any legal agreement of any kind, or exercise any rights whatsoever in relation to the offering of any product. Before making any investment decision, you need to consider (with or without the assistance of a financial adviser) whether this information is appropriate to your needs, objectives and circumstances.

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