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Annuity as a Retirement Option

By Compuquotes Team on March 27th, 2008
Annuity

Annuity is definitely an option for retirement. Why? Despite all your efforts in the present to provide for your future, ordinary savings or insurance may not be enough. The possibility of your assets now not being enough to ensure support for you come retirement time, you will need additional protection. Annuity might be another option for a more manageable, if not comfortable enough, retirement.

How does an annuity help at retirement?

First off, an annuity allows you to save money with guaranteed features in the future that are definitely more practical than ordinary savings. With tax-deferment features, you can get the most out of your investment even while you begin accumulating it now, without the considerable tax implication. With flexible features, you have a choice of having your annuity investment paid to you at retirement at an amount of your choice, at the frequency you like - whether monthly or quarterly or longer, at returns you can opt for now.

Why consider an annuity investment?

Have you ever computed if your company-sponsored retirement plan will be enough for the remaining years you have after retirement? Studies show that most plans sponsored by employers are limited, if not outright insufficient, to assure you of the kind of comfortable living you want come retirement time. Pensions and welfare from social or government service security may not be enough, too. Though their amounts tend to increase regularly, the increase is sadly not that compatible with inflation and purchasing power erosion. Taxes can also eat up a considerable portion of your ordinary bank deposit, unlike an annuity.

Annuities protect your savings for retirement as they get better returns for your money. As they are strictly planned for your retirement, you are not allowed to be tempted now and withdraw from your funds only to totally erode it away and scrap your retirement objectives.

The flexibility does not stop there. Annuity options will allow you to choose a scheme where you are guaranteed a monthly amount as long as you live. Some will even provide death benefits and flexibility to assign or pass the benefits of the plan to heirs or nominated beneficiaries. You are the master of your fate as you set the amount of fixed or variable payment you want to receive at retirement as this amount will be pre-agreed, together with the returns or interests on your investment until the proceeds of the benefits have been fully paid. You can opt for lifetime income while you live out your retirement years; this can be pre-computed based on your sex, your age, industry average life expectancies for your type, etc. You can even include your spouse or a child or dependent in the plan as joint installments in some options are allowed to be paid to two payees. Even if one payee outlives the other, the payment to the surviving payee continues.

With all these, you also have choices as to whether you will opt for fixed or variable annuity (which you can determine based on existing economic conditions), immediate or deferred annuity (which you can determine based on prevailing tax regulations). The ball is in your court now.

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