Information about Annuity and Retirement Annuities
By: Mike Anderson
Submitted: 2011-08-24 22:21:23 | Word Count: 551
An annuity can be defined as an investment made by a person either in lump sum or by regular installments paid over a certain period of time, and the person gets a specific amount of money in return yearly, half-yearly or monthly either for whole life or for a definite number of years. When the fixed annuity period for annuity payments is over or after the death of the annuitant the amount of money invested in annuity is returned back in addition to a certain sum of money. This additional sum of money is calculated at the time when the fixed annuity period is over. It is different from life insurance as it does not provide any insurance cover. Annuity provides a guaranteed income for life or for a certain period.
Actually, annuities provide an income to a person after his or her retirement and that is the reason why they are also called pension plans. An individual investing in Annuity has to make payments either in lump sum or by regular installments over a fixed number of years and these annuity premiums and payments is fixed on the basis of the duration of human life. Annuities are an investment which provides solutions to the financial problems which occur after retirement or in old age. Buying an annuity allows a person to receive a guaranteed income all through his life; it also enables the annuitant to avail tax benefits. An important disadvantage of annuities is that once you invest in these you cannot withdraw money when you require and moreover, you cannot shift your investment to other profitable areas, which may come up from time to time. Therefore, it is advisable to look into all such matters before investing in annuities.
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Retirement annuities is very beneficial as this investment plan provides more stable and fixed income after retirement. However there are many misconceptions about these annuity plans which make people confuse whether to invest or not to invest in these plans for their retirement. Therefore, in order to be clear it is important to know about annuities and their benefits.
Retirement annuities are a kind if pension plans where you are required to make regular payments in to an annuity account so as to build a considerable amount of money over a specified period of time. You can also opt for making the payment in lump sum. Once this is done the invested money is refunded along with an additional sum of money calculated at that time. Retirement annuities are mainly of two types- fixed annuity and variable annuity. A fixed annuity ensures a fixed income every month. The amount received by the annuitant depends upon the kind of investment made initially and the rates of interest offered by the industry at the time of purchase of the policy. However, payments received under variable annuity depend on the market condition at that point of time. You may enjoy the benefits of the market heights or you may earn less income because there is a lot of risk involved in it.
Therefore, it is important to do proper research before investing in annuity and retirement annuities.
