The Powerful Retirement Strategy Everyone Hated (Until Now)

A Guaranteed Retirement Income For Life - This is what most people are looking for in retirement, and there is a tool that can provide this for you, but over the last 15 years, low-interest rates have caused it to fall out of favour.

But with interest rates on the rise, I see Annuities forming the cornerstone of many people's retirement plans. So what are Annuities, and how can you use them?

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00:00 The Problem
0:52 The Example
02:48 The Solution
4:09 How To Create a Guaranteed Income For Life
6:06 Why Annuities are Better
08:18 How To Use Them Effectively

[JamesShack]

Thank you to everyone who has provideded me with feedback on the Cashflow Planner! I will be releasing a new version with updated features for the new tax year.

[withwilk]

My dad took 25% tax free cash and an annuity at 58, the annuity is small, and basically pays for a holiday or two each year. If he lives beyond 77 then it will have paid off. The 25% cash meant he could semi retire and go part time from 58 to 66 when he got his state pension. Some of the best years of his life working less and living more

[joygibbons]

Did this a year or so ago. Converted part of my LGPS AVC sum into an annuity and took the rest as a tax free lump sum. This boosted my monthly income to a level which will comfortably pay all my bills with some discretionary spending above that level while allowing me to save/invest the lump sum. It’s provided great peace of mind whatever happens. My Mum is going strong at 96 and Dad died at 91 so avoiding outliving my funds is essential.

[Rob......]

For your next video suggestion - please(!!) make a video on pension advice for all those millions in the UK who are renting, and who will not have their own house at retiral.

[TheStubertos]

I've been part of FIRE forums on Reddit for a while now and thought I had a decent idea of how to plans my finances, but watching some of these videos has made me realise that theres a whole level of detail I'm missing right now!

[RetirementContentment]

Thank you James. Annuity payout rates are very high. At 62 now, I just annuitized about a third of my retirement plan with a fixed annuity at 7.4%. This suits my personality. Another third will come from US social security and the final third from investments. I like having a portion in secure lifetime income. Another point is that I don’t want to make financial decisions in my later years or have money available that might fall into the wrong hands. Thanks for a great video.

[rosyposybows]

Like your videos James ! Please be careful when using the sentence ‘ running out of money’ this is a scary statement used by sales people to frighten people in making decisions with their heart and not their heads. None in the UK should run out of money, the government pension is designed to ensure that !

[lifestoryguy]

Tim should also consider that if he lives into his 80s, his chance of having mobility problems increases, as does his chance of getting illnesses like dementia. My point is that it means either due to physical frailty or cognitive impairment, Tim will not need the same amount of discretionary spending because the physical frailty and cognitive impairments will force a natural reduction in his spending levels so much so that he's unlikely to run out of money. I look at my gran who's 89 as an example here. She is fit as a fiddle but no longer drives a car because her reaction times are too slow. She has stopped trying to play the ukulele and only spends around £50 a week on the wee clubs so goes to. The point is while things like a car did cost her thousands of pounds to run in her early retirement, not having a car in late retirement saves her money and reduces the pressure on her savings to fund her lifestyle. This kind of thing is going to happen to us all. Plus it's worth mentioning that your chance of getting to 90 is only around 4.7% which means Tim and most of us here on YouTube are probably going to die in our 70s or 80s. As I live in Glasgow I will probably be dead by 70.

Basically, Tim needs to consider all the activities he will spend money on in early retirement that he just won't spend on in later retirement as he comes to the end of his life. It's unrealistic to assume you need the same level of spending throughout your entire retirement period.

[Lupinicus]

A nice balanced presentation of the options. This is very useful information. I spent many years as a trustee for a large company pension scheme and of course many people do not pay much attention to their retirement until it starts to loom. You are providing valuable insights and doing so without any bias. Well done.

[martyedgar]

Now I have more knowledge about personal finance. I just subscribed to your channel. Big ups to everyone working effortlessly trying to earn a living while building wealth in this recession. I’m 47 and my husband is 51, we are both retired, no debts. Currently living smart and frugal with our money and still earning passively even in recession. Saving and investing lifestyle in the financial market made it possible for us this early even till now we earn monthly through passive income.

[GMS-qw]

The snag with the annuity plan is that in a couple the annuity benefits are lost on first death. Yes there are joint life annuities availble but add on some inflation proofing and the rates are paltry. If instead another investment vehicle is used the funds that would otherwise be lost on first death would pass to the spouse/civil partner tax free.

[markcarter]

I checked annuity rates the other day and was pleasantly surprised at the rates on offer. Annuities are now back in the game and I am considering using about 1/3 of our joint pension pot to buy an annuity. I feel this will hedge our income streams ( property rental / annuity / drawdown) so if one is down the other may be up, or in the case of an annuity, stable. Once again your channel has provided valuable information and food for thought.

[davidandhelen]

Approaching 61 years of age and recently retired plus given our circumstances, I think we'll stick to relying on draw down plus wait for state pension to kick in. Then perhaps reconsider as I approach 70 (God willing). Part of that reasoning is also down to the fact that I currently like the option of being able to potentially pass on whatever is left in our pensions to the kids when we shuffle off this mortal coil.

[ChrisKoups]

Can you make videos also for the average people?
In average in UK the salary is 30k, with a mix pension contribution of 7.5% (both employer/employee) a pension pot for 35 years of work will be just around £200k if you assume a 5% growth....

[STORMCLOUDGREY]

This vid beautifully explains how those of us in our late 50s can pack up work early & take advantage of current annuity rares to bridge the gap til we get our state pensions. Very helpful. THANKS.

[nikhinson]

I am pleased to say that this is exactly the strategy I have in in mine when I retire at 60 in 3 years time. A fixed term annuity to get up to state pension age, seemed like a no brainer :-)

[mikehardwicke]

I've been thinking about an Annuity these past 12 months. Thanks for the tools.👍

[outdoorsman]

Thanks James. It would be interesting to see a video comparing the tax pros and cons comparing an annuity, UFPLUS and standard DC pension with 25% tax free taken (plus an additional option if you think that a 4th option needs to be considered. Plus mix and match optimised opportunities.

[EarlyRetirementWales]

Very interesting. At the age of 52 (Hubby is 56) and wanting to retire from our farm business in 5 years or less, we are finally getting serious about planning for retirement. Seeing a Financial Advisor this week. Not sure I am grown up enough 😂

[neildpadmore]

Watching from Zimbabwe. Thank you. Great video!