Annuity and Retirement Planning

Retirement is not something that one should take lightly. While some never even bother to prepare for it, retirement may come sooner or later and the consequences may depend on how you good you prepare for it. A comfortable retirement is the result of early financial planning. Being aware that you might still need some form of income to depend on even on your retirement is the first step towards formulating an effective financial plan that would work for you. Every plan would require putting your hard earned money to good use.

It pays to save up some of your money in some kind of fund that will provide you with enough income in order to better enjoy retirement. No matter how much you think you have saved up for that vacation or a new home where you plan to spend your retirement life, you would realize sooner or later that you might still need to have some income to depend on. This income should be enough to provide for your needs as well as a bit of the luxuries that you can afford such as travel and vacations. Without such an income, you might find yourself in dire straits in due time. Having a continuous income stream can give you a peace of mind by the time you finally retire.

But how do you build up an income stream for your retirement? Its pretty simple. You save. Saving a part of your earnings can help build up a fund that you can use for your retirement. But saving it won’t be able to provide you with an income stream that you can depend on for your future retirement. What you would need to do is to invest it. And the best way is to invest your retirement fund in a safe and secure financial instrument that many companies out there offer. One of the best options available for you is investing your funds in annuities.

An annuity is income that is guaranteed by an insurance company after you have invested a certain amount of funds for it. The funds that you invest are made to earn a set interest rate from which your money begins to earn from year to year. Most annuities may take some years before you can fully avail of some payout. This is a perfect vehicle for those people who want to start planning for their retirement early.

But there are also other type of annuities that will be able to provide you immediate payouts if you wish to start on saving later in your life for your retirement. They are called immediate annuities. And just as the term suggests, you may be able to avail of income payouts as early as the first month after you have bought an annuity policy.

The advantage of having an annuity for a retirement fund is that you usually enjoy tax deferment on your funds at the duration of your annuity. Taxes paid for such investment instruments are usually deferred as long as you do not avail of any early withdrawals on your annuity. The benefit of tax deferment is that you get to earn from the money that you would otherwise just pay as taxes. With the wonders of compounding working for your tax-deferred annuity, you get to earn more faster and in less time.

 

Posted by Ardent Editor on Feb 26 2007 in Annuities

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