Planning long term financial security is essential to make sure that you are not dependent after retirement. There are many products available to help you not only secure your finances but also boost your retirement income. With a little planning, you will be able to live a financially free life even after you have retired.
There are specific financial tools and products that are meant to boost income post retirement. One popular choice among pension seekers is annuities. An Annuity is an insurance plan that provides a lifelong guaranteed income against an invested amount. With annuities, the investment amount, the length of the payment period and the interval between payments determine the size of your income. In addition to boosting your retirement income, annuities also offer large tax benefits as you can make an investment that provides guaranteed returns. You must be careful when you invest in annuities to make sure that there is value for your investment.
If you have made an investment in a property, you can even generate revenue from it through an equity release to boost retirement income. This financial product allows you to stay in your home while you are able to get a lump sum amount or a fixed monthly income against the value of your house. The income provider will be repaid after an agreed period, usually after the home owner’s death. This type of investment is ideal for those who do not have heirs to their property or have multiple properties that can be used as definite income providers.
Equity release schemes have gained in popularity over the last ten years as a solution to retirement income issues. When state pensions or private pensions are not enough, you can use your property to give you an added amount each month. How you use that money is based on your needs. For some it is a matter of gaining a little income each month to enjoy a holiday, go to a movie, or have some fun as retirement is meant to be.
There are two equity release plans that are most common and within these two there are subsets: lifetime mortgages and home reversions. Home reversions use property you own in full to sell it. You can sell the entire house or just a portion of it. The amount of property you sell is considered as part of the entire home valuation then calculated to determine the appropriate amount of funds to be given to you. Often you get lower than the actual house value, since the provider is going to sell the property upon your death or move to a care facility. You get to live in this home rent free under a lifetime tenancy agreement. Anyone who is a part of the contract also gets to stay in the house before it can be sold. This type of equity release ensures there is no payment to be made after your death.
Lifetime mortgages are different since it is a true loan. You retain the full ownership of your property. The only different from a regular mortgage and lifetime loan is the repayment option. You do not make payments on lifetime mortgages. Instead, when you move out or expire your house is sold to pay off the equity release mortgage. This option gives you retirement income without the headache of making payments on a mortgage.
There are four main choices in lifetime mortgages each based on your life expectancy, house value, and age. You only need to be 55 to obtain a lifetime mortgage, whereas home reversion requires you to be 65. If you have health issues you may get an enhanced payment. If you want you can also use an interest only lifetime mortgage leaving only the principle balance of the equity release upon your death. For some this is a more comfortable option.
You can also take a few precautions before retirement for long term financial security. You can make investments in assets whose value is time based. These investments include shares and real estate that will help you deal with market issues like inflation. However, there are risks involved which can be compensated by diversifying income instead of focused investment. Such investments can also boost your retirement income by providing additional financial sources.
Making a good financial plan to boost your retirement income will ensure that you can enjoy your time after retirement. This is your chance to live a carefree life. Don’t let mere financial issues hold you back.