BLOG: Five income drawdown tips

0
Written by:
03/01/2014
Towry's Andy James offers five top tips on how to maximise the benefits of income drawdown.

1. Make sure that you are doing income drawdown for the right reasons. Are you looking for flexibility of income, continued investment returns or better death benefit options? If none of these are important to you then question why you are undertaking drawdown in the first place?

2. Ensure you are comfortable with the investment risks involved in income drawdown. The critical yield on a drawdown illustration will give you an indication of the investment returns you need to maintain the income value of your investments. The higher the figure, the more difficult it will be to achieve, and the more risk you will need to take. If the risk you need to take does not match the risk you are willing to take then drawdown is probably not for you.

3. Understand how much you need to be taking through drawdown each year and match this with your budget. Don’t just take the maximum because you can, as it will deplete your fund quicker and may lead to you having to reduce income later when you don’t wish to.

4. Use the flexibility that income drawdown offers. Drawdown can greatly assist with tax planning as you can raise or lower the amounts you withdraw depending on other income sources. Use this to give yourself the most tax efficient income you can and don’t forget to use your capital gains allowances in conjunction with this income as part of your retirement planning.

5. Never discount the purchase of an annuity. Even if drawdown is right for you, would it make sense to take some of your income via an annuity and therefore give yourself a level of guaranteed income? For most individuals, the purchase of an annuity at some point during their retirement will probably make sense. It will probably be better to do this in stages rather than in one go. This could give you a better balance of annuity rates over the years and also may give you the opportunity to purchase different types of annuity, including enhanced annuities should your health deteriorate over time.

Andy James is advice policy manager at Towry

Tag Box

Debt

Pension

Spending

Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Insurance Experts: Are you fully insured? Click here to get a quote.

For a free quote or to speak with an insurance expert call 0800 1218744

Fixed rate savings: monthly or annual interest?

If you’re looking to lock your savings in a fixed rate product, you may need to decide between monthly or annu...

Short-term lender offers 0% interest loans to members

A lender offering interest-free loans in return for a membership fee has launched this month, giving people in...

New children’s savings account pays 3.5%: how does it stack up?

Nationwide has today launched a new children’s savings account paying 3.5% interest if parents have an account...

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
Another bear falls: Dr Doom turns bullish for 2014

Nouriel Roubini, famed for his gloomy predictions on the global economy, has become the latest bear to turn more optimistic...

Close