Annuities Explained In Layman’s Terms

Mickey | Financial Services | Friday, December 17th, 2010

It is important for you to start saving and investing from your very first pay check. If you haven’t begun as yet, it is never too late to start. It is vital to slowly build up a nest egg that will ensure that you live a comfortable and secure retired life.

An annuity is a financial tool that helps you plan your retired years. If you want annuities explained in the simplest terms, they are contracts between you and an insurance company of your choice. Depending on your choice of annuity you will either make regular payments for a term chosen by you, or you will make a lump sum and one time investment.

Annuities are great way to plan your retirement as they provide you with regular income. It is important that you select an annuity that suits your financial situation. While one investment plan may be great for an individual, it may not appropriate for another. This makes it crucial for you to know what kind of investment you are making.

The deferred annuity pays out after a set term, while an immediate kind will offer you a regular source of income virtually immediately after you make the investment. The former is ideal for working people who receive a monthly pay check. The immediate type is worth considering if you have come into an inheritance or received a large sum of money from a settlement.

You may be close to retirement and wish to place most of your savings in an immediate fixed annuity. The return or income you will receive from such an investment is fixed. This would mean that when you invest a bulk amount of money you will start getting payments of a fixed amount immediately and for the period that the contract states. To make an informed choice do ask for clarifications regarding fees and riders before you are ready to sign on the dotted line.

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