As more and more people insure their future lives there are those still not yet decided on the best way to safeguard the retirement income. Well, it is common knowledge that as you grow older so will your industrious ability reduce. This is not to say you become redundant but rather in comparison with the young blood around you become more like your children’s advisor rather than the one who actually does stuff after all shouldn’t one take a long vacation after working for all those years? That’s why you will need to plan ahead of this time, at least ten years in advance. One of the most popular and reliable investment decisions is taking up a fixed annuity. It is a contract that lets you give a certain amount of money either in lumpsum or in premiums to an insurance company which after an agreed period of time pays back the money in lumpsum or in installments and of course with a good interest income.
Its underlying principle is that a fixed annuity is supposed to be one of the safest investments around. Whenever one puts their money into one then a sure return is sure to come your way. Your money is usually invested in the most reliable ventures that have guaranteed returns like the government bonds or the corporate ones. This in return means that you don’t have control where the money is invested in. The returns though relatively lower than in the other annuities are sure.
The interest for fixed annuity offered for the first few years, which is also called bonus rate, is usually higher. The lumpsum or the premiums paid today earn an interest, which is compounded. At the end of each year, the previous years’ interests are compounded and they are allocated an interest, in short your interest grows as well as your premiums. This would not be the case in other investments where your interest though compounded is withdrawn regularly.
Withdrawals are supposed to be done in a future specified date or starting on a future specified date. The payments will start being made between one month after the annuity’s maturity and thirteen months, it all depends on the annuity’s terms. The withdrawal of a fixed annuity either can be in lumpsum or as many prefer a distributed payment package that ensures a standard flow of income to the annuitant. Withdrawals can also be made in case the annuitant passes on, confinement to a nursing home or a terminal illness befalls the annuitant, all these withdrawals will be made free of charge. If you happen to be below 59.5 years and wish to withdrawal your annuity then you will be charged the surrender charge, which could be as high as 25% of your money not forgetting the 10% tax still on your money. It is quite expensive to withdraw before maturity.
In conclusion, we can say that taking a fixed annuity is the best retirement decision that one can make today. It ensures your life continues smoothly.