10:51 04 March 2013
Everyone knows about pension pots, but people are sometimes surprised by the outcome of these so-called pensions once they retire. There are a lot of financial pathways to navigate during your retirement planning. Annuities and drawdowns are the two major choices, but even these may not be enough to offset inflation or unexpected medical costs as you age.
Here’s why investing in an ISA, or more than one, could help you during your retirement years:
•You have two choices of investing in an ISA: cash or stocks and shares so you can control the level of risk you’re happy with.
•Guaranteed return of the money you initially put in with cash ISAs.
•Withdrawal of funds whenever you need or want them.
•Your contributions have already been taxed which means that you will not need to worry about the withdrawals you make. There is no additional tax for using the funds you deposited. Certain dividends may be taxable income so check with your financial institution or in Independent Financial Advisor when you do your retirement planning.
The primary reason you would not want to investing in an ISA as your sole source of retirement income is because there is an annual cap on the amount which can be invested and you may wish you deposit more. It may be beneficial especially if your employer contributes to your pension, to make the most of your employer’s generosity, but to also be careful and plan for income from an ISA.
After spending years doing retirement planning, many are concerned with the relatively frequent changes to the pension regulations. Over the years there have been many changes, some of them contradictory to previous regulations, so investing in an ISA may provide a touch more stability.
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