A Retirement Annuity can address an individual’s economic needs when there are no other sources of income to rely upon. These are stages when the person has entered the retirement stage or is not able to work after a certain period of time. In order to secure one’s future financial needs, a person would have to prepare for retirement annuity long before the retirement takes place. Not many people are able to choose the right annuity plans as there are too many around and most of them are very complicated in nature. However, if one goes by what the experts say then an individual must allot at least ten percent of his total earnings to his retirement annuity fund every year.
These annuity plans are for those people who are looking for tools which give the maximum possible returns with the least possible risks attached. A deferred retirement annuity plan is a safer and decent return-generating option when compared to the highly risky stock investments and the little returns providing savings accounts. Deferred annuities are preferred by most people looking for a steady stream of income post their retirement. This is because the returns from deferred annuities are exempted from tax or in other words, it is tax-free. However, if the money is withdrawn before the maturity period, the returns could be taxed. The benefit of tax-free returns is that the gains from the annuity are not reduced by tax calculations and as a result, there is good amount of money available to be compounded in the future. Without tax deductions, the annuity fund would grow at a faster pace.
If an individual has not yet started an annuity fund and is closing in on his retirement, then he has the option of going in for immediate annuity. The returns from an immediate annuity plan can be received by the individual as soon as the annuity contract is put under implementation. Those people who have a pension plan, deferred annuity or IRA can convert their plans into immediate annuity plan and reap the benefits. As far as the taxing procedures with immediate annuity is concerned, only that portion of the interest would be taxed which is withdrawn by the individual on a regular basis. The entire interest amount of the fund would not be taxed at once. Not many people are aware of the immediate annuity fund. However, those people who have been introduced to this plan are reaping its benefits.
Immediate Annuity – Is It Worth Buying?
When it comes to retirement, pension plans and saving; there are lots of people who invest time in determining how much should they be investing and when should they start funding the investment plan. But not many people think as to which plan should they be going for or which one has the best highest potential of providing a regular flow of income post retirement. After all, retired people look for a stream of income and not a lump sum in their old age.
There are some people who think that investing in retirement funds is not worth the time and the money, as it would be of no use if people do not live after retirement. People with such skeptic attitudes must understand that with the advancements of medical technology and better treatments provided in hospitals, almost 25 percent of the average person on earth is able to live up to 97 years, which is quite a few years post the retirement. With so much time, people have more time and opportunities to spend after retirement when compared to the time they had while working.
One of the funds that are gaining popularity and people are considering is an immediate annuity fund. An immediate annuity fund gives a regular flow of income, monthly to be precise, to an individual after his retirement. The monthly income is possible as the individual would give a lump sum amount to an insurance company and the interest returns of which the insurance company would give to the individual as monthly income. The monthly returns are taxed however. There are lots of companies which are offering and encouraging their employees to go for an immediate annuity plan, either with their existing insurance company or from the list of companies that provide these services.
As far as protection from inflation is concerned, that could be guaranteed only if the person increases his withdrawals from the fund at least by four percent every year. Most of the companies do not adjust the returns from the immediate annuity fund with inflation and this could be a major problem for people, especially after looking at the consistent surge in the inflation rates. Inflation rates are an even prominent problem for retirees as they usually spend on things like medicine and health care center services, whose rates are highly affected by inflation. However, the problem with going for annuity plan with inflation guard is that the returns would be less in the initial period.
Features And Benefits Of Variable Annuity
People related to the insurance sector are familiar with variable annuity and the benefits it offers. Variable annuity is nothing but a contract between the insured individual and the insurance company that agrees to pay an agreed sum of amount as per the terms and conditions of the policy. In order to enjoy this benefit, the insured needs to make periodic payments for a specified period of time.
Some of the features that variable annuities offer are:
•Tax deferred growth on earnings made.
•Death benefit- In case of sudden demise of the insured, a certain percent of your account value or a guaranteed amount is paid to the beneficiary.
•Last but not the least is the option of receiving periodic payments for a definite period of time (20 yrs or lifetime) depending upon your individual choice.
Apart from these, variable annuity also comes with special riders attached to them. However, these riders are only optional and completely left to the discretion of the insured. The most popular types of variable annuity living benefit riders are:
•Guaranteed minimum withdrawal benefits- ensure 100% return of premium paid through a series of annual withdrawals. The withdrawals covered by these riders are usually limited to a certain percentage of the premium amount paid. However this option has to be selected at the time when the contract is issued. The only concern with this rider is that the contract holder must live long enough to take the required series of withdrawals.
•Guaranteed minimum income benefits- this rider gives you the right to annuitize your contract into a payout program wherein you can receive a specific amount of money after a certain period of time. This condition is applicable irrespective of the performance of the contract. For instance if you have invested $50,000 into a guaranteed minimum income benefit contract, you can request monthly payments of at least $420 per month and these payments could start after few yrs (say 10/15 yrs) depending upon your choice. This kind of rider is perfect for an individual looking forward to invest in a retirement plan.
Choice of riders to be attached to variable annuity depends upon the insured person’s requirements and his current financial position. In case you are not able to take a call on your own, you can always consult a professional adviser who would guide you on to the right path.
Maximize Annuity Rates For A Better Retirement
Retirement is a time in which most people envision themselves relaxing and enjoying life and leisure. The last thing one wants is to have money hassles and worries. The news of plummeting annuity rates has scores of retirees worried. Retirees have been forced to take smaller pensions and worry about making ends meet in their retirement years. In order to maximize retirement benefits, one needs to establish the best annuity rate one can get. This will maximize your retirement income while giving you less worry and hassle over financial issues.
There are several methods one can use in order to increase one’s annuity payments. The first step is to investigate various financial services and annuities for the best rates. The internet is a great investigative tool to use to discover the maximum annuity rates offered from various financial services. There are several financial services web sites as well as banks and insurance companies that are really helpful in offering information and insights regarding annuities, annuity calculations and future annuity payments. Also, talk to several financial advisors. They have the knowledge and experience at offering the best financial advice and guiding retirees to maximize their financial payout during retirement. They have the knowledge and guidance to find the highest rates around as well as the best financial game plan for the retiree.
Next, a retiree should state the current condition of his or her health. The worse health conditions that a retiree has, the greater the chance he or she has of dying in the near future. This increased chance of dying will actually boost annuity rates. If a retiree is a smoker, or has had a serious heart condition or cancer, it is preferred that he or she declare that because an increased chance of dying will actually boost one’s annuity rate. Also, since men have shorter life expectancy, they tend to get a greater annuity rate. Thus, men should take advantage of that while the higher rate is still offered.
Next, if the annuity rate is lower than the retiree desires, he or she can temporarily delay the annuity, hoping that the annuity rate will rise in the very near future. The danger of that is there is no guarantee that annuity rates will rise in the near future. The annuity rate may decline, thus the retiree may actually lose money by temporarily delaying receiving payment from the annuity.
