Annuity 101 for Baby Boomers
Most of you Baby Boomers have probably heard that annuity plans are a great way to save your money for the future, and can also save you some tax payments. It can also generate a steady flow of income for you when you are no longer working. But some of you may be wondering how annuities really work.
Purchasing an annuity plan is just like investing in a product, or a company. You entrust your money into a certain company, given the guarantee that this company will work for you, and will make your money earn over the years. It is an agreement between two parties (you and the company) and just like any formal, legal and binding agreement, it is sealed with a contract, in this case it will be the policy which details all the responsibilities and entitlements of each of the two contracting parties.
One item specified in the policy is the premiums you are required to pay (or the money you need to invest). You see Baby Boomers, we can pay this investment in a lump sum or in installments over several years. Of course, you choose the one most convenient to you. You also specify how much you want to invest, and in return the insurance company will tell you how much you will be entitled to, after a specific number of years.
The other significant item that will be specified is the payout, or the manner in which you will get your money (and its earnings) back. Just like the payment of premiums, payouts can be handed out in a lump sum or in installments. Lump sum will be desirable if, say, you want to buy a country home where you’d want to spend your days and nights just being idle and listening to the wind. Installments on the other hand will be useful if you still want to have a monthly income of sorts, which will take care of your household expenses.
Always bear in mind that the specifications in the annuity plan will always be dictated by you – remember that this is your retirement you are planning on, so take time to consider the important details. You should also evaluate several proposals prior to signing up with any insurance company. Free quotes can easily be had online and make sure to compare several quotes first. You can even ask your kids to help you evaluate these proposals. While you should hasten fixing your retirement plan, it wouldn’t do any good to rush into a decision.
