Retirement Annuity: Making After-retirement Life Worth It

Retirement can be full of worries if one does not have enough funds to live rest of the life in a dignified way. For spending an anticipated after-retirement time it is important that you decide on Annuity options (better understood as pension plan) when we are in good working condition.

Annuities are available in several flavors and it has potential to become a lucrative investment vehicle for two basic reasons. The first reason being that the money you invest in annuities can be tax deferred. Secondly you are already preparing for retirement so that you don’t have to worry later. These days, a large number of employers withheld a small amount from your weekly paycheck and invest it into an insurance product so that when you retire, it should be a relaxed phase of your life.

By investing in an annuity you pay a suitable amount to insurance companies through regular payments or so-called premiums. The insurance company invests this money in bond portfolios and stock as a result of which your money grows over a period of time exponentially. Since the money is invested in conservative portfolios, you remain protected from any kind of downfall in the stock market. When you receive a lump sum amount after you have retired, you do not only get the total of what you paid as premiums but an amount that would have grown exceptionally over these years.

Basically three kinds of annuities are available: deferred annuities, variable annuities and immediate annuities. All these different types have their own advantages and disadvantages and they should be selected depending on the income and tax goals in your mind.

Immediate annuities can be understood as a money management tool which allows you to invest a portion of your savings for monthly payments that you will receive either for rest of your life or for a specific period of time that you have decided. The only disadvantage with immediate annuity remains the fact that you cannot withdraw any cash in case of unforeseen emergency.

Deferred Annuities is one-up over immediate annuity because of the facts that the money that you plan to receive after retirement can be taken as a lump sum or as paycheck withdrawals. Variable annuities plans allow investment of your money in selection of portfolios. You can mix and match various annuities products and also receive tax benefit.

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