What is an annuity?
An Annuity is an agreement between Insurance Company and an individual made to manage savings and take care of investments. It is a tool that mobilizes your pension savings in such a way that you have enough income coming to you once you retire. This way, by having an annuity, you make sure that you not only save for your retirement but manage those savings well too, so that you have enough income to fall back on all through your old age! There are many flexible options available today for individuals who are considering taking up an annuity for income mobilization. You can have your annuity income coming to you for a certain period of time or you can decide to get a fixed annuity payment every month, regularly for as long as you live. This can prove to be a very wise decision in the long run as very few people retire from a Company that provides a pension plan that guarantees a fixed income throughout their retired lives. The Government is making constant efforts to provide more flexi
You may decide to use the funds in your RRSP at maturity to purchase an annuity from an insurance company. In exchange for your lump sum, the insurance company agrees to provide you with a regular income for the rest of your life. The insurance company will invest the lump sum to provide you with the income. So, the higher interest rates are when you purchase an annuity, the higher the monthly income you will be able to purchase. You may choose a guarantee period–say 10 or 15 years–so that if you die before that time is up, the insurance company will continue to make the payments or to provide an equivalent lump sum to your named beneficiary. The advantage of an annuity is that it provides a consistent stream of income and you dont have to continue making investment decisions. The down side is that an annuity reduces flexibility, since you are locked in for the duration of the contract.
An annuity is a long-term contract between you and an insurance organization to provide a guaranteed lifetime income. Unlike life insurance, annuities provide benefits during your lifetime. Most people buy annuities to supplement their income during retirement. Annuities offer several advantages as a vehicle for accumulating retirement funds. Annuities earn a competitive interest rate. And annuities have a guaranteed minimum interest rate, assuring you of minimum growth and safety of principal. Best of all, annuities are tax-deferred. Unlike certificates of deposit, money market funds, mutual funds or bonds, the interest you earn on your annuity is not taxed until you withdraw the money. Since this usually takes place at retirement when your total income is lower, these funds may be taxed at a lower rate. An annuity can be an extremely flexible component of your retirement plan, which, if you choose, can provide the security of a consistent flow of income that cannot be outlived. Many
