Few wise advice regarding annuities

If you are about to retire, have you planned about your pensions as yet? Do you have all your money locked up in savings account that gives you low interest? Then it is time that you look for an alternative income source so that you are able to maintain the same life style post retirement too just like you are doing now. You must be very careful about the kind of investments that you are planning to make. Make sure that none of the investments are risky. In such scenarios, any form of investment in annuity is the right solution for you which will offer you a secured and a guaranteed income just after your retirement.



What is an annuity?



An annuity is a contract that is signed between the insurance company and the person investing in annuity. The contract says that you as an investor must pay a certain amount of money regularly for some tenure of time. This is how you can invest your money. Once you become retired, you will start receiving money in equal amounts from the insurance company for the rest of your life.



Annuities are complex and a little difficult as a financial vehicle. You might not be an expert to understand the finance entirely to gather all knowledge about annuities. Thus, if you are planning for a life time annuity, here are some of the things that you should keep in mind:



There are various annuities available, like the deferred annuities, immediate annuities etc. you must identify and choose the kind of annuity that will suit your requirements. There are several factors like liquidation option, pay out time and the kind of investment that it requires etc that comes into play when you choose an annuity. Depending on the kind of payment structure and the timing, you can choose immediate annuities or deferred annuities. In case of deferred annuities, you will start receiving your payments after your retirement, and in case of immediate annuities, you will receive payments right after you invest your money.



There are also fixed and variable annuities that depend on the type of investment. The fixed annuities give you a guaranteed income where as the variable annuities give you return as per the performance of the market. Annuities also deal with or without prepayment penalties. There are also some pros and cons of an annuity. So, it is always wise to understand the nuances of the annuities before investing in them. The lifetime annuity has the following advantages:



The investments made on the lifetime annuity are tax free. The source of income is regular, and since the annuities are funds that are guaranteed by the state, even if the insurance company is unable to return your money for some reason, all are not lost at all. There are also some disadvantages of lifetime annuity:



You will not get the money during any emergency necessity. If you take out any money before the maturity, that particular amount is subjected to a 10% tax penalty.