Retirement income investments
Some of the most popular investments which are often used to generate retirement income include:
Annuities
An annuity is a contract between an investor and a life insurance company. The investor pays a fixed lump sum to the insurer and the insurer agrees to pay regular amounts (including interest) over an agreed period of time. The capital can be returned at the end of the agreed term or gradually during the term of the annuity. Both the capital and the interest paid are guaranteed and earnings are generally tax-free for investors over 60 who invest with superannuation money.
Allocated pensions
Also called 'account-based pensions', allocated pensions can only be purchased from superannuation funds. They normally provide tax-free income if you are 60 or over. To meet the tax-free criteria you must withdraw a minimum level of income from the allocated pension each year. Allocated pensions allow you to determine how much income you withdraw each year and they offer a choice of investment options including share market investments.
Term deposits
Another option retirees consider is to withdraw their super as a lump sum and put their money into term deposits. These are fixed-term, fixed-interest savings accounts. The fixed terms can range from 3 months to 5 years. They provide guaranteed income and capital. However, as they are not in the super environment, they are subject to tax which can reduce the income they deliver.
