We’ve already discussed both types of annuities you can purchase at retirement. A living annuity or a guaranteed annuity. If you are thinking about a guaranteed annuity, it will be useful for you to also have a little insight into the different types of guaranteed annuities… because there are some differences.

Essentially, there are four types:

1. Fixed escalation annuities,
2. CPI or Inflation-linked annuities,
3. With-profit annuities, and
4. Level income annuities

The difference between them is largely all about the increases they give you each year. No matter which one you select, you are guaranteed an income for the rest of your life. But inflation will cause your expenses to increase each year.  So, you need to ensure that your income increases in a way that can cover the increased cost of living.

There’s generally a trade-off with this. The higher your expected increases, the lower your starting income…

In the video that follows we discuss each of these four options in more detail. Watch and listen closely:

If you decide that you’re wanting to go with a guaranteed annuity, ask for a comparison between a handful of guaranteed annuities. What are each of their starting incomes and what are their expected increases?

When comparing different product providers to one another, make sure you are presented with the same like-for-like option. That’s the only way you can really make a fair comparison.

Now you know about both types of annuities you can get at retirement. A living annuity and a guaranteed annuity, as well as the different types of guaranteed annuities…  In the next post we’re going to compare a living annuity to a guaranteed annuity and discuss the pros and cons of each.

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• Preparing for retirement – This is the first post in a short video series covering everything you need to know to start preparing for retirement!

• How much cash do I take? – The first question you’ll ask at retirement is “how much cash do I take”? Let’s help you answer that with this 4 minute video.

• Living annuities – With living annuities, the most important thing is that you understand the implications of how much you’re withdrawing each year.

• Guaranteed annuities – Guaranteed annuities are essentially an insurance product. They guarantee you an income for the rest of your life!

• Pros & Cons: Living vs Guaranteed – With a living annuity you have less certainty but more flexibility. With a guaranteed annuity you have more certainty, but with some limits. 

• The blended annuity – A blended annuity is a combination of a living annuity and a guaranteed annuity. The idea is to determine what your essential expenses are.

• Your retirement options – Let’s recap some of the key points to ensure you understand all your retirement options and make the best decisions with your money.