This annuity review is intended to explain who needs a pension annuity investment, and why they are so important. When you retire, you have no money coming in and will rely on social security unless you have made some form of financial provision.
“People are living longer, and retirement is no longer just a few years, but can be as long as 20-30 years and more,” says James from iannuityrates.co.uk. “It can be a terrible shock to change from living comfortably to being on the bread line! Yet many who fail to invest for their retirement end up in this situation.”
Most people in regular employment are already investing for their annuity, although not all although they might not be aware of it. You must either take steps to sign up with an insurance company for a pension annuity investment plan, or join your company pension plan that likely operates a 401K defined contributions scheme.
A defined Contributions scheme provides you with a lump sum on retirement that you can use to purchase the annuity of your choice. Your pay a proportion of your pre-tax income into an annuity investment plan and your employer also contributes an agreed amount. On your retirement, you can use the accumulate investment to purchase an annuity to provide you with a regular income throughout your retirement.
The 401K and IRA Annuity Investment
Such schemes may have a minimum retirement age, so check what that is if you want to retire early. For individuals saving for their own retirement, you have two options: a 401K or an IRA (Individual Retirement Account). A 401 K is the above defined contributions scheme, into which you and your employer pays. As to who needs one, it is frankly to the advantage of every American in employment to take a 401K, or they will be leaving their employer’s contribution on the table when they eventually retire.
Normally, when you join a company operating such a plan, you will be asked if you want to join. Irrespective of whether you think you are too young to save for your retirement, you should join. It will come sooner than you think, and it’s too late then to wish you have made better provision for what could these days be another 20-30 years of life. Do you want to spend that on social security?
Who needs an annuity investment? You do! Even of you don’t think so right now, you need a pension annuity investment program to begin now if you don’t already have one. The sooner you start salting away some of your income into an annuity investment, the more comfortable you will be in your retirement. Do you want to visit your kids and grand-children after you retire? Maybe you don’t even have the kids yet, but plan for the future or you will likely live to regret it!
What are your options? One is the 401K that you cash in for an annuity when you reach 59.5 years old, or an IRA with the same restrictions. Because such an annuity investment is deducted from your gross income (before tax), you pay tax on it when you cash in the investment. If you use your 401K or IRA completely to provide you with a regular pension, you will be taxed on your monthly payments, although with any tax-fee allowance applied first.
Roth 401K and Roth IRA
You also have the option of a Roth 401K or Roth IRA, where payments are made from your post-tax, or net income. In these cases, you pay no further tax when you use your annuity investment, either to actually purchase an annuity or take as a cash sum: there are limits to how much of an annuity investment can be taken as cash.
If you are in employment you should make a pension annuity investment on a regular basis, a 401K being your best option. If you win money on the lottery, or come into an inheritance, you could use part of that to purchase a deferred annuity, payable at a later date when your require it, or, even better, an IRA that you can cash when you reach a certain age to provide you with another regular monthly pension.
You Do Need an Annuity Investment
Whether or not you believe right now that have to save up for your retirement, the simple answer is that you do! Inflation means that cash loses its value, but pension annuity investments tend to rise along with interest rates and the cost of living. You could save your money in a bank or building society, but your annuity investment will tend to maintain its spending power far better than banks and building societies.
Once you retire you can cash your investment to buy an annuity. This will give you a pension for life, generally paid into your bank account each month. If you save enough, you could also make that a joint annuity, which protects your spouse or partner in the event of your death – then your pension will be then paid to her or him for life.
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A word of caution about actual annuities – where you fork over a lump sum of money and get paid out a dribble of it over time: they can be terribly expensive and may not be the best choice for all. Your heirs may lose out if you buy one and die before all of the money is paid back to you. Fees can be excessively high. There are other ways to develop an income stream in retirement.