Retirement Annuity Plan is a plan to take a retirement annuity. Then retirement annuity itself is an insurance product that pays out income, and can be used as part of a retirement strategy. Annuity is choice for investors who want to receive a steady income when they are retired. The company pension itself may not be enough for regular needs in a comfortable retirement. Therefore, retirement annuity is needed for the future when you are in the retirement.
Features of an Annuity
When we have a retirement annuity plan, there some features which can be received such as security and flexible terms and payments. Our interest and capital are guaranteed. The flexibility terms can be seen in the flexibility in choosing our investment term, either one year, 50 years or even for our lifetime. We can also decide how often we get paid, either monthly, quarterly, half-yearly or annually.
Other features offered in annuity are the lifetime income, inflation protection, no product fees and tax effectiveness. If we choose the lifetime annuity, we can enjoy the cash flow for the rest of our life. With some annuities, we can also elect to index our payments, so they can move in line with inflation. We may also have the tax free if we buy annuity with the superannuation money and the level of the regular payment meet the Government’s minimum payment rules.
Advantages of an Annuity
The biggest advantage of the annuity is that it gives us regular payment in our retirement. The other advantages of annuity are that the tax-deferred grow within the annuity contract; it guaranteed both rates of return on our money and lifetime payment if we take lifetime annuity and we can enjoy all the features given if we buy annuity.
Disadvantages of an Annuity
For starters, they should pay commission to the insurance brokers who sold the annuities. Sometimes we should also pay for the guarantees. If we think that we don’t need it, then we shouldn’t pay for it. If we invest in a variable annuity we’ll also encounter high annual expenses. The last is that annuities can be overused in banks. So we should make some consideration before taking the retirement annuity plan or we might have bigger expenses in paying the annuities fees. It is because many annuities sound like great money maker, but sometimes there are some hidden fees which can cut out profits, so be aware.