At some point in your life, you should ponder what your options are once you reach the legal retirement age. Celebrating not having to clock in and out of work is something to look forward to, but our golden years might not seem quite so golden if we don’t have the necessary funds to pay for all of life’s essentials like food, water, electricity and heating.

Saving up for retirement is a good idea, but it’s best to start as soon as possible. Setting a little money aside every week or month (depending on how often you get paid) over the course of several years is a good start, but when it comes to choosing the type of pension product from which you can spend your hard-earned retirement savings, which one is best?

Piece by piece

In terms of receiving a regular income of sorts after you retire, the best thing to do is to take out an annuity, but how do they work? In simple terms, annuities pay out a portion of your savings as guaranteed income every year post-retirement. A percentage of your savings is paid out each year over a set period, dependent on a number of factors.

You can take out an annuity that lasts a number of years, but the longer your annuity lasts for, the less you’re likely to receive each year. If you’re completely in the dark about how much you could stand to receive each year from your annuity, then using the annuity calculator on the My Pension Expert website could help.

Taking no chances

If you’re a risk-averse saver, then taking an annuity out is the best thing for you. Having at least some income guaranteed annually means that you don’t have to fear running out of money. Also, they can be used alongside the basic state pension, depending on how much you receive from you annuity.

There are a few factors which govern how much you stand to receive from your annuity. Your health, life expectancy, financial circumstances and any habits you have such as smoking can impact on how much you get each year. However much you have saved up when the time comes for you to walk away from work for good, annuities are definitely worth considering.