Retirement Annuities And Their Benefits

Citizens of the United States have various investment options available to them to save money to lead their post retirement life in comfort. Government provides many options like a 401k plan, IRA, Roth 401k, Roth IRA etc. However, people can look beyond these investment options and invest in retirement annuities. However, this option should be explored only after an individual has exhausted other government regulated options. Generally people invest in annuities under the following two situations:

* When an investor has already reached the maximum limit of investment in government regulated plans.

* When an individual has been disqualified from investment in different government regulated plans.

Under retirement annuities people invest their money with an investment manager who provides them with different investment options. These options can be chosen by the individual or the manager can select the best plan for an individual. However, annuities are of two types depending upon their return pattern. An individual should look carefully into both the types before zeroing in on one. This can save the person from a lot many problems. The two types of retirement annuities are:

* Immediate retirement annuity In this annuity an individual can convert a part or entire savings in a lump sum amount or on monthly basis.

* Tax deferred annuity In this type of annuity, the taxes on contributions are deferred. Therefore the principle amount as well as the earnings grows tax deferred till the time of withdrawal. This annuity brings greater returns than immediate retirement annuity.

Depending upon the interest rates that are offered annuities can be divided into two types:

* Fixed annuity In fixed annuity, an individual is guaranteed fixed returns irrespective of the material conditions of the market. Inflation can cause these fixed returns to become insignificant, but there is a fixed annuity variant attached with some annuities that takes care of the inflation rates.

* Variable annuities Variable annuities have a constantly changing rate of return. The returns depend upon the value of stocks and funds invested in. However, annuities are not guaranteed by the government and therefore in case of financial crisis or bankruptcy an individual is not guarded against his/her creditors. Also, the returns may vary and it is the full responsibility of the individual.

While choosing an insurance company for annuities, a person should check several things. Instead of going for higher interest rates a person should go for the track record of the company. A company's prospectus should be carefully read and checked. A person should look for hidden costs that the company might have deployed. A person can also appoint an annuity adviser to select the best option for him/herself. An annuity adviser can help a person choose the best option according to one's lifestyle requirements.