Annuities Offer An Extended Income After Retirement

By Author: Robert Cook
Total Articles: 111
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What is an annuity? Well, the annuity is an investment plan which is drawn as a contract between the investor and the insurance company. The investor agrees to make a series of sequential payments at some specific intervals and when that specific period of payments get over, the investor gets back an increased amount in equal instalment.

The annuity is a Latin word which means income. Do not confuse the annuity with that of the life insurance or health insurance or any other policy. It is neither a savings account nor a saving certificate. An annuity is not a short term investment for reaching a short term financial goal. It is a completely different kind of investment plan that can give you an extend income in the form of alternative income after your retirement.

There are many types of annuities available in the market. Some of them are the deferred annuities, immediate annuities, fixed and the variable annuities. In case of the fixed annuity, your income would be guaranteed on a minimum rate of interest. In case of the variable annuity, ...
... since the rate of interest varies according to the fluctuating market, the premiums and the returns also vary accordingly.

There are also two phases of a fixed deferred annuity like the rate of interest that is currently available in the market and another which is the minimum guaranteed rate of interest. The minimum guaranteed rate is the lowest that you can earn from your annuity investment. The rate of interest is stated in the contract initially. The current rate of interest on the other hand depends on the reserves of the company and also on the interest that the insurance company earns on their present portfolio. You can always opt for a fixed deferred annuity and get guaranteed returns just 30 days later. But it is always recommended that you wait for the next 12 months and then take the previous year’s earnings into the next year in a carried forward manner.

Along with an IRA, you can also continue to have a retirement account apart from the fixed annuities. Annuities are the only vehicles that can offer you a guaranteed income after retirement that can last for as long as you live. Insurance companies have their reserves safe as per the government law and thus your hard earned money is always safe and secured with the investment company as annuity.