different types of retirement income
Although we traditionally think of retirement income as coming from a pension in reality it can come from many different sources. This article looks at some of the sources of retirement income sources.
The one that most people rely on in the UK as a source of retirement income is the state pension. If you receive the full state pension in the UK you can expect to receive around £9100 per year Once you reach the state pension age.
After the state pension most people will then be relying on pensions that they have saved up themselves. In the UK these will fall into two main categories defined benefit pensions (which are becoming increasingly rare) and defined contribution pensions. There are other articles on this website which explain these in more detail.
In the UK, many people invest in second or even third properties which they can rent out. these provide rental income in retirement that can be used to supplement or replace their pensions.
people may have savings or investments outside of their pension wrapper. In the UK these are usually kept in an ISA wrapper As this is the most tax efficient way. The benefit of being in a nicer is that when you come to withdraw the money there is no tax to pay.
In retirement some people downsize either the house or the assets to provide a retirement income. For example if you live in a house with four bedrooms you may decide to sell that by house with two bedrooms￼. The extra income that you receive from the house sale can then be used to support your lifestyle in retirement. And alternative to this is an equity release mortgage which allows you to stay in your own house but means that on your death you will pass on less property or less assets to your family.￼