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Retirement is an event that everyone should plan for and look forward to. It is a momentous occasion, as it is a culmination of all your education and hard work paying off, granting you an opportunity to sit back and relax. Unfortunately, for some people retirement isn’t as relaxing as it should be since they fail to adequately plan for it. Many people don’t save their money or invest it into any retirement options, leaving them with an inability to pay their bills once their work days are over. This happens even though studies show that saving just a few dollars every paycheck and starting while young can have a major impact on the quality of your retirement. This is why people should not only save their money before retirement but also look into other options such as retirement annuities. What are retirement annuities? Are they the right fit for you and your family? What are their pros and cons? Here are four things you need to know about retirement annuities.
What Are They?
A retirement annuity is a way of financing your retirement and allows you to receive a steady flow of income once you call it quits. Although not as mainstream as other retirement options such as a 401K, retirement annuities can still be a great way to finance your retirement if researched properly. By receiving money through various payments throughout retirement, you ensure that you will still some money coming to you even when you’re not working. Although this sounds good, annuities are often criticized for being more expensive than other retirement options and much harder to use properly. However, with the right research and support annuities can still make a major difference in the quality of your retirement.
What Are The Options?
There are several options when using retirement annuities. For example, you can receive payments throughout your entire retirement or for just a set amount of years. You also can decide whether you receive the payments monthly, quarterly, or annually. This allows you to customize your retirement annuity to fit the lifestyle you want to live post retirement. However, the biggest option is whether you want a guaranteed payout through fixed annuity or if you want to reinvest through variable annuity. Regardless of what you go with, there’s no denying that retirement annuities offer you a lot of options for your future.
When Should You Start?
As with all retirement options saving should begin well before retirement. However, retirement annuities are different in the fact that they should be started after another retirement plan has already been planned or completed. Annuities are most effective when they are used to supplement another form of post-retirement income instead of being used as your sole source of income. This is why you should begin paying into annuities after you already have plans with another option such as a 401k. In general it is best to start early, but there’s no need for annuity payments to affect your other pursuits such as searching for homes for sale in Toronto, New York or Massachusetts.
What Are The Pros and Cons?
Annuities can be a great way to finance your retirement because there are no limits or restrictions on how much you can save with them. This means those that are far behind in their retirement savings can use annuities to catch back up. In addition, annuities are very flexible in how you receive your retirement payments, allowing you the freedom to shape your post-retirement life the way you want. However, annuities typically have fees such as insurance charges and commissions that you have to deal with. These can add up, and can eat into your retirement fund. In addition, annuities often require you to keep your funds in the program and will charge you fees to take it out. This means your money will be inaccessible in cases of emergency.