Annuity Investment for Retirement

By: Allya Reeve
Submitted: 2007-01-17 16:17:14
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Annuity is an insurance product that can guarantee to receive amount of money regularly as result of investment until the end of annuity contract. Why should you consider annuity investment for your retirement?

Annuity as an insurance product offers insurance benefits such as death benefit, and protection of your investment to beneficiary. While annuity as an investment offers investment benefits such as income protection for life, relatively higher interest rate than CD or any bank investments, and tax deferred benefit.

Insurance companies use your annuity investment to invest in bonds and stock market depends on annuity product you choose. According to its interest rate, annuity can be categorized into fixed annuity and variable annuity.

Fixed annuity is an annuity that can guarantee a minimum annuity payment regularly no matter what happens. While fixed annuity most enemy is inflation, there is fixed annuity variant that may protect your investment against inflation. Instead offers a fixed interest rate, equity indexed annuity set earns to an equity index such as Standard & Poor’s 500 Composite Stock Price Index (the S&P 500).

Variable annuity is the most complex annuity type. Variable annuity only sold by prospectuses, your investment is not guarantee by any party and its value may increase and decrease depends on performance of your investment option.

Many financial experts advice not buy annuity until you have maximize all your other retirement saving such as 401(k) plan and IRA. However, there is an option to use annuity investment as your IRA investment. The advantage of this option is higher interest rate over other kind of investments such as CD. While consequence is there is no additional tax deferral benefit, because IRA is already tax deferred.

Don’t forget to consider about tax, many people want to change to lower tax bracket during their retirement. Well, the decision will vary based on your expectation of retirement lifestyle.

As conclusion, choose well-known insurance company over higher interest rate promise. Request a prospectus, read it, understand it features and benefits as well as fees and charges. Annuity is a complex product, you should contact financial advisor to identify which annuity product or annuity type suit for you. The past do not equal the future rule apply in annuity investment as well as in life.

Article source: Expert Articles