Retirement Funds and Income Continuance Planning
- Author Carla Jack
- Published December 23, 2010
- Word count 604
Most people need to be pro-active in planning their finances for retirement. A pension is a long term savings plan that is used to build up a fund which can then provide a regular source of income when you retire. Retirement funds are an extremely tax efficient way to save money and the sooner you start the easier it is to fund a pension. If you are nearing retirement, there are actions you can take straight away to optimise the tax breaks available.
When you are investing for the long term future, it's essential to take professional advice and choose a pension plan that is structured to suit your lifestyle and the level of risk you want to take. A financial services provider needs to be registered with the financial regulator in your country of residence in order to help you plan out your finances. You will need to take into consideration your entire financial position including other assets of value, future earnings, possible inheritances and existing financial commitments. Once you have a good idea of your financial position you will need to start looking into different retirement and income continuance planning packaged such as ARF's and AMRF's.
Approved Retirement Funds
In Ireland, if you are a proprietary director, self-employed or if you have an existing PRSA you may be eligible to invest in an Approved Retirement Fund (ARF). Through an ARF you can invest in a variety of assets including shares, property, bonds and cash deposits - so the value of your fund will depend on how these assets perform.
One advantage of the ARF is that you can stay in control of your retirement money. You can select the type of assets your money is invested into, depending on the level of risk you want to take. If annuity rates are high at a particular time, you can switch ARF funds into an annuity, getting better rates than you might have done at an earlier stage. The value of your ARF passes on to your beneficiaries after death. This is a distinct advantage over conventional pensions, where the value can be eliminated or much reduced.
Approved Minimum Retirement Funds
Where an individual does not have the basic independent pensionable income required for an ARF, they can invest in an AMRF. AMRF's are similar to ARF's however you cannot withdraw any of the original investment value until you are 75 years old. A minimum lump sum needs to be invested and maintained in an AMRF until that age. Although you cannot withdraw the original investment value, you may still access and withdraw any increases in fund value. Also if you have set-up an AMRF you may then be eligible to invest in an ARF.
Income Continuance Planning
If you are self-employed, then it's important to plan to protect your income in the event of an accident or long-term illness. Even as an employee, you may only be entitled to very limited cover if you become ill. The easiest way to minimise this risk is to plan for it. This may simply involve re-arranging existing investments or it could mean insuring against the risk.
An income protection plan is a cost-effective and tax-efficient way to protect yourself against a loss of earnings if you are out of work as a result of an unexpected illness, accident, dis-ability or injury. It offers you peace-of-mind now and secures your income in the future, should you suffer from a health crisis. For most people it would be impossible to meet mortgage payments and other financial commitments and to maintain a reasonable quality of life on State Benefits alone.
Kintyre Financial are independent financial advisors who offer Approved Retirement Funds, Income Continuance Planning and financial advise Ireland. http://www.kintyrefinancial.ie
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