In our previous posts we discussed both a living annuity and a guaranteed annuity in detail. Remember that at retirement, you need to purchase an annuity. So, it’s important for you to understand the differences between the two. To give you all the information possible, this post is going to focus on the pros and cons of each (living vs guaranteed) and do some comparisons.
With a guaranteed annuity – what would my starting income be?And what increases might I expect? Remember, you’re guaranteed income for the rest of your life, but the cost of goods also goes up (don’t underestimate inflation). So, you want to ensure that your guaranteed income will also increase in a similar manner to cover you for the rising cost of goods.
In this video we take a 65 year old male and consider his options. Take a look:
Flexibility vs certainty
Generally, the biggest difference between a living and guaranteed annuity is: Flexibility & Certainty
I am passionate about helping people understand their behaviour with money and gently nudging them to spend less and save more. I have several academic journal publications on investor behaviour, financial literacy and personal finance, and perfectly understand the biases that influence how we manage our money. This blog is where I break down those ideas and share my thinking. I’ll try to cover relevant topics that my readers bring to my attention. Please read, share, and comment. That’s how we spread knowledge and help both ourselves and others to become in control of our financial situations.