How a Retirement Annuity Works
A retirement annuity can be a good way of diversifying your investment portfolio and lowering the degree of risk it has, making it a popular insurance product for the typical retiree who is averse to risk. This kind of investment essentially decreases the amount of risk in your portfolio as it provides steady guaranteed income for a certain period of time after you have completed your annuity payments or paid a one-time investment. The payment periods for these products may be any set time frame, which can be for the rest of your life or beyond (wherein your spouse will continue to receive payments from the annuity after you, the primary annuity holder, pass on).
Types of Annuities
Annuities come in different kinds. The two most popular annuities are deferred annuities and immediate annuities, thus named due to how the payments the investor makes are structured. The terms of these products may usually be changed to suit the needs or financial objectives of the holder, offering the investor a good degree of flexibility, in addition to being a practical investment for the risk-averse retiree.
Annuity Payments
Upon completion of the payment/s required for your annuity (or on a set date), you will start to receive annuity payments in the form of guaranteed monthly income until an end date. The number of payments made to you will be based on the average life expectancy of someone of your age, general health, and other related factors. If you live far longer than the average, you will still receive payments after the insurance provider has exceeded the worth of your annuity.
On the other hand, you may also receive less than the worth of the annuity if you pass on before you reach the average age. For instance, if you invest $50,000 and the provider calculates your remaining lifespan at 20 years, living for 17 years means you will probably receive less than that initial sum in overall payments. In comparison, the same investment for a person who lives beyond the average expected lifespan will generate additional payments even if what the investor has receive exceeds the specified amount.
The older investor typically has low risk tolerance, making the guaranteed income and relative safety provided by annuities essential to the strength of his or her nest egg. To know more about the benefits you can get with a retirement annuity, contact your insurance provider.
About the Author:
Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group provides seniors with retirement annuity information that can help them build bigger and stronger nest eggs. For more information on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com/products/annuities.
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