Facts about Retirement Annuity and Deferred Annuity
By: Mike Anderson
Submitted: 2011-10-12 05:05:42 | Word Count: 437
It is very important to plan finances beforehand, especially for retirement. This is so because post retirement the pension that is received is not sufficient enough to meet the expenses. Thus, it is necessary to make investments while working to avail its benefits after retirement. The most common investment for retirement is Retirement Annuity.
Retirement Annuity is a tax deferred annuity which means that you will be exempted from paying tax during the period of investment. Investing in Retirement Annuity is safe and also a source for providing a series of payment post retirement. The schemes under Retirement Annuity are either for lifetime or for a fixed period. It helps you to save tax as your investment will be deferred from tax. This is the reason it is also known as tax-deferred annuity. In Retirement Annuity longer the period of investment higher will be the returns so stop thinking and start investing before it is too late.
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However, it is very important to gather all relevant information before investing in Retirement Annuity. You must ask the insurance company to provide you an annuity guide so that you can see the details regarding the investment. In case you are unable to understand anything you must contact a financial advisor for help. Before investing you should also check the reputation and credibility of the insurance company.
People always plan to enjoy life after retirement but such enjoyment is possible when you have financial security. The pension received post retirement not enough to support the family expenses. Thus, there is a need for some extra monthly income. This is possible through investing in annuity. There are different types of annuities; they are immediate annuity and Deferred Annuity.
Deferred Annuity is also referred to as tax-deferred annuity. Deferred Annuity can be defined as an annuity in which the annuitant does not receive payments until specified period. In Deferred Annuity there are two phases: first phase is the savings phase and second is the income phase. In the savings phase the annuitant puts money into the annuity which invests the money on behalf of the annuitant. In the income phase the annuitant receives payments. An important feature of Deferred Annuity is that it is not taxed until the income phase starts.
Thus, Retirement Annuity and Deferred Annuity ensure an additional income for the people post retirement; hence it is advisable to invest as soon as possible so as to receive higher returns.
