Sunday, June 19, 2011

Retirement Annuity Basics

By Claire Curtis


A retirement annuity can be a great addition to any investment portfolio especially if you are seeking to diversify your investments. But what makes it so special? If you want to retire with guaranteed source of income minus the risks, then a retirement annuity is the right insurance product to purchase. But don't just go off purchasing an annuity just yet. Approach any reputable insurance company such as Puritan Financial Group and they will tell you that there are different types of annuities available. If you don't have a working knowledge of what these types are, just the act of choosing which product to get can be confusing. To help you choose the best type of annuity based on your needs, read on.

How Annuities Work

Annuities start making money once you put in your initial investment or the first investment in a series of payments. On a set date or series of dates, you can receive a lump-sum payout or a set of payouts, respectively. Aside from the lump-sum payout option, you can also receive your annuity payouts every month, every quarter, and every year. Payouts may be made over the course of your lifetime, or for a certain number of years. How big or small your payouts are depend on numerous factors, including the total of your investments in the annuity, how long your payment duration is, and the performance of the assets your annuity payments are invested in (in the case of a variable annuity).

Types of Annuities Available

With deferred annuities, your money will be invested for a pre-determined time. You can begin to take distributions from it once your payments end as well as when your annuity matures, which usually happens in retirement. With immediate annuities, the investor can already receive payouts as soon as the first payment was made.

Deferred and immediate annuities can also be variable or fixed. A fixed annuity basically generates fixed payout/s for the investor, while an immediate annuity mostly has its payouts based on the performance of its underlying investments in the market.

You can greatly increase the stability of your investment portfolio because of the steady income a retirement annuity can provide. Just be wary of abusive sales agents and brokers who may persuade you to buy retirement annuities for their own gain and charge you with expensive prices for products that might not be beneficial for your retirement plans. Perform your own research to make sure that you only buy the correct type of retirement annuity from the most excellent provider. Then you can ask for rates from several providers and come up with a shortlist of insurers with the assistance of an independent retirement advisor. If you are looking for an independent retirement advisor, start by looking at companies such as Puritan Financial Group.




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