Understanding Fixed Annuity and Retirement Annuities
By: Mike Anderson
Submitted: 2011-09-21 07:05:30 | Word Count: 550
A fixed annuity can be defined very simply as an amount that is paid to an insurance company by you as monthly premiums. In return the insurance company assures to pay you a fixed monthly income over a certain period of time. There are many types of fixed annuity like you can opt for a single premium payment where you can start getting payouts immediately. If you do not want to receive payouts immediately you can defer it and can begin it at any other date. This means that you can defer the payouts until you get retired and start the fixed annuity payouts after your retirement.
You can be certain to receive your fixed annuity payouts regularly once they start, irrespective of recession or inflation. Being an investor you have the choice on how to receive the payments. Actually, there are two options and you have to choose from them. The first option is to settle on a fixed annuity rate for a specified period of time. This means that you will have to decide the time period for which you want to receive payments and on this basis your premiums and payouts will be decided. You must know that the payout you will receive consists of part principal and part interest. You can also choose fixed annuity with a deferred payout.
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The next option in fixed annuity is to annuitize which means that you will receive regular payments till your death. The amount of the payout will not change no matter how much amount you have paid as premium. There will be some restrictions on the amount of money you can withdraw and after how long.
Retirement annuities can be defined as retirement plans which are designed to help the people so that they can secure and grow their hard earned savings in order to have a source of income after retirement. There are many retirement annuities available but the two most popular retirement annuities are tax-deferred annuity and immediate annuity. In a tax-deferred annuity the taxes that are paid yearly on the interest that would be earned from the retirement plans are deferred and in this way it allows them to compound the interest that is earned on the principal as well as earnings. This type of annuity will provide more income in the long run.
Another most popular type of annuity among the retirement annuities is immediate annuity. In this retirement plan the investor can convert entire or a part of his savings into a guaranteed source of income which can be received either in monthly installments or in lump sum. These two retirement annuities are easily available or you can go to a financial institution which specializes in providing retirement annuities plans.
It is very important to be financially secured specially after retirement because the average income reduces and the pension is not enough to meet all the expenses. Therefore, it is essential to invest in good retirement annuities plans so as to have a regular source of income and enjoy life after retirement.
Thus, it would be an intelligent step to invest in fixed annuity or retirement annuities plans.
