Understanding retirement annuities

There are different types of retirement annuities available to you. Understand their pros and cons before you make a purchase.

15:39 25 February 2013

At some point, we all want to retire and as much as possible, we would want to do it sooner. This can happen to you if you plan ahead of time. The thought of retiring can be stressful if you don’t have enough money to live by. So, years before you hit your golden years, you must already start thinking about saving for your future. 

One of the things that you should save up for is annuity. This is a financial product that you can buy once you retire using so you’ll earn monthly income. The amount of money that you receive per month will depend on the size of your fund, your presumed lifespan, and the prevailing interest rate. 

 

By investing in an annuity, you pay regular premiums to insurance companies. The company will then invest your money on stock and bond portfolios. By doing so, your money grows over a period of time.  

 

There are different annuities that you can choose from based on your preference and fund size. Immediate annuities allow you to earn money right away and you’ll receive fixed monthly payments for the rest of your life. 

 

Deferred annuities, on the other hand, delays the payments of income until the retiree elects to receive them. Lastly, variable annuity is when the insurance company guarantees a minimum payment at the end of the accumulation stage.