Annuity – A Key to a Worry-Free Retired Life
Annuity is an insurance product that is purchased by making a series of investments over a long time span. In exchange, the annuitant receives a regular flow of payment during the retirement days. The term ‘annuity’ is extensively used in finance especially in connection with the payment valuation that throws light on the time value of money based on future value and interest rate.
A variety of annuities is available in the market to satiate the needs of different individuals. The variation in structure is made on the basis of an extensive array of factors including payment date, rate of interest and the time period over which income is paid out by the insurance company. Some annuities are so designed that the investors continue to get the set volume of payment as long as they live. After their death, payment may be skewed to their spouses as per as the contract. Alternatively, many an annuity is structured to pay out a steady cash flow over a set time period irrespective of the life span of the annuitant.
Fixed and variable types are the commonest classifications of the annuity policies. Fixed category refers to a guaranteed flow of per-determined figure of income. The main advantage of these annuities is that the sluggish market condition does not inflict any negative impact upon the income flow. But the annuitant are also unable to reap the benefits of the vibrant market scenario. On the other hand, the variable annuity though carries a little bit of risk but turns to be profitable when the investment funds do well in the event of promising market condition. Though the investors may not get an assurance of stable income in this case, still they can experience rewarding return depending on the performance of the investment fund.
An annuity is the concrete source of sufficient income in the post-retirement stage. As this insurance product effectively cures the financial ailment of the retirees, so they should make a wise decision regarding the purchase of annuity that will best satisfy their needs.
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