Defer your income until later
As you enter retirement your investment risk profile should naturally become more conservative. Lifetime can help you achieve this.
By deferring your regular income payments you can insure your future income from negative market shocks and take advantage of positive returns.
How much will your income be?
The initial amount of money you invest is called your Protected Income Base. You can invest anything from a minimum of $25,000 to a maximum of $1,000,000.
Your regular, insured income payments are called your Lifetime Withdrawal Benefit. This is calculated from the size of your Protected Income Base and the age at which you begin your income payments.
If you choose to defer your income payments, your Protected Income Base will never be less than the amount you originally invested, even if there is a market downturn.
Each year we'll measure the balance of your account against your Protected Income Base. If your account balance has gone up we'll lock that gain in and your future income payments will rise. If your account balance falls your Protected Income Base will stay the same. This means your future income can rise with positive returns but it can never fall.
Another benefit of deferring your income is that the percentage value of your Lifetime Withdrawal Benefit increases with age, so when you do withdraw you'll get more.
Why you may want to defer your income
If you are 65 today but you decide not to take an income until you’re 70, your payments will increase from 5.00% of your Protected Income Base to 5.50%. Your payments will remain at that higher level for as long as you live.
The graph shows that if you defer income payments your Protected Income Base can rise each year with positive investment returns. Increases to your Protected Income Base are locked in and cannot fall. While your account balance may fall with market fluctuations your Protected Income Base will not.
I'm 65 years old with and I want to invest $100,000 but don't want to start my income payments until I'm 70.
Once you reach 70 years old, your annual after-tax income (Lifetime Withdrawal Benefit) will be 5.50% of your Protected Income Base. Your income at this point will never be less than $5,500 per annum after-tax (or $212 each fortnight) and it could be higher.
Every year from age 65 your Protected Income Base will be reviewed and locked in to reflect market growth. However, if the market goes down your Protected Income Base doesn't. Here's how this might look in a market that drops and then recovers:
At age 65 your Protected Income Base is equal to your initial investment. However from age 65 to age 70 the market drops and then recovers.
Your account balance is affected by market fluctuations during these years but your Protected Income Base is not.
At age 70, your Lifetime Withdrawal Benefit is 5.50% p.a. of your now higher Protected Income Base of $118,000. This means you will now get $6,490 p.a. after-tax ($249 per fortnight) for the rest of your life.
This case study gives you a detailed example of how Lifetime can help you grow your future income with certainty
What happens if your circumstances change?
No one knows what’s going to happen in the future, so it’s important that your finances have the flexibility to cope with whatever life throws at you. The Lifetime Income Fund allows you to:
- withdraw up to 20% of your account balance as a lump sum without penalty. Your income payments will be recalculated to take account of this
- withdraw your full account balance without penalty
- have your remaining balance go to your estate on your death
- change your deferral period with little notice
- invest additional sums during the deferral period to top-up your future income payments
If you wish to find out more about the Lifetime Income Fund we can mail you a free information pack