Annuities – Important Retirement Investment Vehicles For People

If you want to invest for your post-retirement life, there can’t be any better choice than annuity plans. These financial plans are based on insurance benefits and there are many reasons associated with them, which can enforce a retirement planner to think of them.

Here are the most appreciable benefits associated with an annuity plan:

• The most attractive benefit of buying an annuity is that these plans are tax deferred.
• You can invest a large amount of money in your annuity, either at once or in parts over year.
• These flexible payout plans can generate cash stream for individuals planning for retirement funds.
• Death benefits associated with annuity plans entitle the beneficiary to receive amounts equivalent to premiums paid.
• There are no time delays associated with receiving the earnings and these are free from probates.

Annuity can help you to live a peaceful life even after retirement, as you can depend upon income generated by these plans. However, you need to wait until the age of 59 and half to become eligible to withdraw distributions without tax penalty, which is otherwise 10% in case of early withdrawals.

Here are two types of annuity plans available to retirement investors:

Fixed Annuity

These annuity plans promise the returns at a fixed rate. You can either choose immediate fixed annuity to start receiving the returns immediately, or deferred fixed annuity to delay your returns to the retirement age. These plans allow you to adjust the rates, though the rate is restricted from falling below the value determined in the contract documents. Thus, an investor is protected from low interest rates in these fixed annuity investment plans.

Variable Annuity

The variable annuity plans offer variable rates of return, as the investor is allowed to choose investment sub-accounts of his or her own choice. These investments may vary from low to high risk factors, depending upon the performance of the market in a given amount of time. The amount invested can increase or even decrease at the end of the plan. You must go through the prospectus of these plans before opting for this option. Variable annuities are not sold by government or saving institutes.

You must be familiar with the fact that there are many factors, like surrender costs, administrative fees, charges for extra benefits and other charges associated with annuity plans. Also, there are contract limitations, which must be known to you, so that you can invest appropriately in the retirement saving plans.