subject: What Is A Retirement Annuity And What Can It Do For Me? [print this page] A retirement annuity is an insurance product that is used, generally, to fund your retirement. Like life insurance, the policy insures a specific occurrence in your life. In the case of a retirement annuity, that even will be your retirement. You can use your retirement annuity either as a way to fund your retirement entirely, or to provide supplemental income to your 401(k), IRA or other retirement products you may have. Why get an annuity? You have worked for decades and you have worked hard. You deserve to enjoy your golden years doing the things you have always wanted to do, and the best way to be sure you can is to make sure your retirement is fully funded.
You can fund a retirement annuity with a lump sum, or you can fund it with payments over time. Either way, it will annuitize when you retire, paying you monthly from the day you retire until the day you pass away. Depending on how it is set up, it will either default to the insurance company if you die, or your surviving family will receive the rest of the payments.
Retirement annuities can grow until the day they are annuitized due to interest or investments. Low risk annuities are like savings accounts or CDs. They do gain a guaranteed interest rate, and you are guaranteed not to lost money when you invest in them. The interest rate may not be very high (though it is usually higher than most CDs), but you are going to gain some and you are guaranteed not to lose anything.
You can also opt for higher risk annuities. The negative is that due to the risk, these accounts can possibly lose value. However, because they are invested instead of earning interest, there is the possibility they can earn much larger returns on investment than lower risk options. The choice is really up to you. You might be willing to accept the higher risk with the chance of the return, or not. There is also a medium risk option which works like a combination of the two, with a portion of your payments earning interest and a portion invested. These retirement annuities would not lose a lot, if any. They also would not earn as much on the investments as they could either.
A retirement annuity is an excellent way to supplement your existing retirement plan. You can use the money for anything you like and you are guaranteed to get a certain set payment for the agreed upon term, or the rest of your life. For many people, retirement annuities are excellent choices for supplementing their retirement income and enjoying their golden years.
by: Katherine Smith
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