Annuity - A Fascinating Scheme For Your Retirement Age
With wide range of flexibility, Annuity makes available fascinating schemes to meet your financial requirements after retirement
. It gives a regular income to full-fill longterm financial goals. Therefore, this is a sort of insurance for rest of the life.
However, before investing money for the long term Annuity plan, the understanding of the basics of this plan is imperative for you. In fact, Annuity is a contract between a purchaser i.e. you and a respective insurance company that offers life-long protection against the premium money you pay on regular basis for a fixed period of time. Interestingly, your regular investment is tax-deferred, which means that, you do not need to pay income tax until you receive it. Even when you withdraw it after the maturity, the tax amount is nominal.
Generally, Annuity is of two types:
Qualified Annuity: It is normally an Individual Retirement Annuity or IRA, possibly tax deductible under specific defined guidelines. In addition, the interest you earn out of it accumulates, which is also tax-deferred, but the money you withdraw after the completion of maturity is subject to income tax. As per the provision defined under the IRAs, your contribution is limited that maximum goes to 2,000 annually, but if you are 50+ years old then you can avail special facility under which you can invest about 335 additionally.
Non-Qualified Annuity: It is usually purchased with the money on which you have already paid the taxes; therefore, the interest you earn is tax deferred and you need to pay the tax once you start the withdrawal.
Apart from these two types, the third one is Fixed Annuity, under which you have been guaranteed a fixed interest rate for a certain period of time. This is comparatively more flexible and offers you the choice of interest rates, allowing you the liberty to pay the amounts in various installments over time. So, your money gets saved at the same pace you want it to be.
Moreover, most of the Annuities are long-term investment plans tailored to facilitate you a retirement income; however, the mode of withdrawal depends upon your choice whether you want monthly, quarterly, half-yearly or yearly.
by: Tony
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