How You Can Benefit From A Retirement Annuity
One of the newest products in the retirement market is called a retirement annuity
. These relatively new products are designed to supplement your existing retirement accounts such as your traditional IRA, 401(k) and Social Security benefits. Some people need products like these because their retirement account are either insufficient to support their lifestyle or they want to have the extra padding in case of unforeseen circumstances. There are many different things that can happen that can cause a well-planned retirement plan into one that just will not handle the bills anymore. Among these unforeseen circumstances are bad investments, family emergencies, natural disasters or as so many people around the world are seeing right now, economic disasters such as the recent collapse. No one saw it coming, but it left many people out in the cold financially.
So, what is a retirement annuity, and how can you benefit from it? A retirement annuity is an insurance product, and functions like most other insurance products. You will pay your premiums, and once the insured event occurs, your benefit from your policy will pay out. In the case of an annuity, that benefit is a monthly paycheck. The size of this check can depend on a lot of different factors, depending on the length of the policy and the type of policy. You can choose low, medium or high risk policies.
Low risk policies put your premiums into an interest bearing account, much like savings accounts or CDs. The policy is guaranteed not to lose value, but it will not gain as much as you might like. High risk accounts are not guaranteed against losing value, but there is the possibility of your money earning a whole lot of return on investment. These accounts are invested in stocks, mutual funds or other investments. They could potentially lose value, but there is also the possibility to earn a lot of money. Medium risks combine the two, allowing you to capitalize on investments, with a portion of the money in a low risk interest-bearing account. This minimizes your loss while maximizing your gain without the potential to lose everything you put in.
These annuities can make the difference between an underfunded retirement or relaxing your golden years away in a setting of your choosing. You can use the money just like any other income, on anything you like. The earnings are tax deferred, and you only pay an income tax on the accounts earnings. Your retirement annuity can be a vehicle toward ensuring you can retire exactly the way you want.
by: Katherine Smith
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