The Retirement Annuity Explained

It can be very confusing to invest in a retirement annuity, especially for the novice investor. Prior to buying this type of insurance product, you will need to know about how annuities work, in addition to the different kinds of annuities available, and the pros and cons of these investments to pick the best one. While this effort may seem daunting, the benefits you can receive from a retirement annuity provided by a reputable insurance provider can make it worthwhile.

Annuities are safe investments that guarantee returns for the retiree, and also serve to lower the overall risk of his or her portfolio due to growth-oriented investments such as stocks. Annuities can be likened to an investment security that requires investor payments for a certain period, and after that period ends, generates regular payments for another time frame as specified in the annuity contract. If you are averse to or very conscious of the risk you add to your investment portfolio, you can buy retirement annuities to supplement your gains and diminish the potential for investment loss brought about by mutual funds, stocks, bonds, and other popular yet relatively risky options for investment.

Your investment in an annuity can take the form of a lump sum you will have to pay once, or multiple smaller investments over some time. What you pay and how many times you will need to pay is mostly based on the annuity value and the time by which you expect to receive the annuity payments. For example, if you are in your late 50s and start to take annuity payments by your mid to late 70s, you will need to pay lower amounts over a longer period of time, in comparison to retiring in five years and only starting your annuity payments now.

Once you begin receiving payments from the annuity on a date specified in the contract, you may continue to get guaranteed annuity payments until death, or until the end of a time frame agreed upon in the terms of the annuity. This allows you a good degree of flexibility, which may go further should you designate your spouse as the recipient of any payments in case you pass on. Due to this feature, a retirement annuity can be a good tool to help protect wealth when you retire, and can also serve to transfer some of it effectively upon death with the continuation of annuity payments to your designated recipient. {pixabay|100|campaign}