What Exactly Is A Retirement Annuity?

Many people are wondering what a retirement annuity is

. In these tough economic times, many of us are unsure about whether or not we have enough to retire. We have contributed to our IRAs, to our 401(k) accounts and we have worked and put money into our Social Security accounts. Still, we do not know whether or not our accounts will be able to carry us through our retirements.

This is to be expected. Lately we have seen many people coming out of retirement because they cannot make it on just their traditional retirement accounts. There are many reasons for this. Some thought they had saved enough money only to find that they had been wrong. The economy has taken its toll on everyone, and some of us have children who have been financially hurt or wiped out by the economy. In the time of need of a child, the parent will always do what they can to help and that has brought people out of retirement.

As it has become apparent that our retirement solutions may no longer be cutting it, new retirement products have begun to spring up. One of those options is called the retirement annuity. A retirement annuity is an insurance product designed to supplement (or perhaps even be the anchor) of your retirement plan. It works like most other insurance products you have heard of. You pay your premiums, and once the insured event occurs, the benefit is activated and paid. With a retirement annuity, the insured event is the date of your retirement and the benefit is an annuity which will pay you monthly to supplement your retirement income.

The annuity will come in 3 different flavors, and you have your choice. Regardless of which you pick, the insurance company will take a portion of the earnings as their profit.

Low Risk

A low risk retirement annuity guarantees that you will not lose money at all, and that you will earn a set interest rate much like a savings account or CD. This allows you to know exactly what you can expect to have upon retirement, but does not allow for much growth. The advantage is that you know you would not lose money.

High Risk

A high risk retirement annuity is invested instead of placed in an interest bearing account. The potential exists to grow your money astronomically, just like any other investment. The downside is that there is the potential to lose money with this type of account.

Medium

A medium risk retirement annuity is like a hybrid of the two, designed to minimize your risk while making you as much money as possible without losing any. A portion of your money is placed into an interest bearing account while the rest is invested. You receive the maximum return on the investment, with a nice cushion in case of any losses.

Choosing the right retirement annuity is totally up to you. You can pick any type of annuity you like, or none at all. A retirement annuity can provide the perfect answer to your retirement needs.

by: Katherine Smith

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