Annuities aren't really all that complicated
When you invest in your retirement, you might consider becoming an annuity buyer as part of your financial plan. Investing in an annuity is the process of making payments pre-retirement, to be paid back to you later with earned interest on top. Examples of an annuity are the , variable annuity and fixed rate annuity.
Annuity simply means that you are putting aside your money and then letting it collect interest before retirement. At retirement age your annuity will be liquidated and you will receive periodic payments (monthly or quarterly typically – much like having an income) during the time you plan your retirement. Depending on the amount of the money you invested initially, the financial institution and percentage rate – you can receive a good amount money back with gained interest. A great advantage of an annuities is that there are often no penalties when liquidated. However, this will depend on the financial institution that you purchased the annuity from and its fine print.
Annuities can be very useful for upcoming retirees. This is can be one of the best options that available if you want to have the most of your money with guaranteed interest gained when you retire. Age 55 is said to be the best time to buy annuities since financial institutions expect people at about this age. If you try to buy an annuity at an earlier age, the information that will be given or discussed will be more limited most likely. You can ask for a bank manager for further assistance to make sure you are doing the right thing.
You can also ask for an annuity buyers guide which contains all the information about the banks payment ratios and time lines that needs to be followed for a given annuity. Say you invest $10,000 for a 5 year period, then you will be offered an interest rate of 3%. But for investments of $10,000 with a 10 year period, they may offer you as high as 10% interest rate – with no liquidation by you within that period. Variables such as this will be discussed by bank managers when you buy annuities from their bank.
One more factor to be considered in buying annuities is that you should be aware of your monthly payments. People often think that when they set aside money, it means that there will be no chances of withdrawing it until it has matured. However, for special cases such as inheriting a large amount of money, a great option to consider would be to put your money into an annuity. By saving your money, you will be able to keep the initial amount and earn from the monthly interest. The bank will keep and use your money, and in return pay you monthly based on the rate of interest that was in the contract upon annuity purchase.
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