The best way to counter vexing circumstance after retirement is to get that kind of financial instrument by which someone can receive steady income or lump sum amount that is where annuity serve our purpose. Therefore, excellent way to earn steady income without any worry of market risk is through annuity.
Annuity: Annuity is a financial instrument that is issued by any insurance company or financial institution. Under annuity, we pay either one time lump sum payment or pay on monthly basis. What kind of annuity a person should take that depends on the conditions? If someone wants to acquire steady monthly income after requirement without risk,
Fixed annuities are best to choose as financial institution guarantees to pay a stated interest, but if a person who is about to be retired wants steady income during or after retirement then immediate annuity serves the purpose.
Immediate annuity, a buyer pays one time lump sum or series of installment and start receiving income immediately or sometime later. Variable Annuity: A person has option to invest in fund under such kinds of annuity-choosing a fund to put in the money-after paying the organization stated amount according to the conditions ,but the fluctuation of investment happens in this annuity as to the performance of the funds . Two phases are associated with this kind of annuity.
1. Accumulation Phase: Buyer have a lot of option after payment during this phase that includes from balanced fund investment to money market and international fund ,but investors need to know investment fluctuation feature that is changeable according to the performance of the fund. Information regarding performance such as volatility, risk and diversification can be got through prospectus.
2. Pay-out phase: You will start reaping fruits during this phase-that is to say-you will receive your payments during this phase and period varies according to condition.
Index Annuity: Insurance Company or financial institution will pay return according to calculation regarding any particular index such as S&P 500 and minimum return guaranteed under this annuity.
Several sorts of annuities are available in market that varies according to the institution. Hence, what kind of annuity is required depends on the buyer’s situation. However, the advantage annuity provides is steady income stream for certain years or for life or lump sum payment. If we have to buy annuity, we will have to conduct either research to find suitable one or will have to get personal consultant service.
Author: Humair Rana