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| Fixed Retirement Annuities Basics Explained Posted: 20 Jan 2013 02:52 AM PST This is a Guest Post by Mar Katz. If you would like to Guest Post for Baby Boomers US, check out our Guest Post for Us page. For the right person, there may be a lot to like about using fixed retirement annuities for retirement income. Many retirement planners trust these financial products because they are considered very low-risk ways to provide income from capital. They may also offer much better growth rates than other "safe" money alternatives like savings accounts or bank CDs. Finally, there are a variety of different products and options, so you can tailor an annuity that best meets your needs. This is intended as a brief and simple overview. Make sure you consult with a financial professional and understand the unique terms of any annuity contract that you are considering! Immediate and Deferred Fixed Annuities Most people consider Single Premium Immediate Annuities (SPIA) when they are looking for a product that will allow them to deposit a sum of money and start getting paid right away. It is pretty to understand the basics. The annuitant gets a regular payout, often monthly, in return for a capital investment. The money in the account may grow according to some pre-set return rate or a market index. All of this will be spelled out in your contract. If you have some time before retirement, and you do not already have capital, you may begin a deferred annuity which will allow you to grow your account over time. You may be able to begin your account with one payment, and you may be able to add future payments every year. How much income can you receive in return for your money? That depends upon how much money you have in your account. It also depends upon the return rate of your contract. Of course, the amount of payments you expect will also matter. You can set up payments to last for a specified number of years. You can also set up your annuity to make "lifetime" payments. An insurer will estimate your life span based upon life expectancy tables. They will use that number to calculate your payments. Are Fixed Annuities Right For Your Retirement? The biggest disadvantage to fixed annuities is the fact that you have to commit for several years. Most contracts do impose a surrender penalty if you pull out your cash too quickly. This means you can actually lose money. It is important to only set up an annuity with money that you do not have to use until the surrender period ends. Otherwise, a fixed annuity may provide you with a low-risk way to enjoy a secure retirement! About the Author: Mar Katz runs BoomBaby.org, a website for baby boomers making positive life changes. You may also want to learn more about Equity Indexed Fixed Annuities. You may also want to join the Baby Boomers US Forum for conversations by Baby Boomers about topics important to Baby Boomers!  |
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