There is a time in the future when we all want to step away from the 9 to 5 grind and settle into retirement. When you are able to do that all really depends on how well you have planned for you future. Some people start planning for their retirement at a very early age, while others tend to wait until they get a little longer in the tooth. If you fall into the latter category, you may want to start thinking about annuities as a way to quickly build your retirement nest egg. Simply put, annuities are a retirement option that will pay you a regular income when you do decide to quit work and settle into your golden years.

How much you get and how long those payments last really depends on how much you put in and the type of annuity that you settle on. If you settle for a fixed annuity, you are basically putting money away that will deliver you a guaranteed amount of money when it comes time to cash in. If you decide to go with a variable annuity, the amount of money you receive will depend entirely on how well your investments have performed in the years that you have been contributing to your annuity. The option you choose basically depends on the level of risk you are comfortable with.

One of the biggest benefits of annuities is that you can put away larger sums of money than you can with other retirement options, and all without incurring any tax issues. Your money grows pretty quickly, as it will compound over time, which basically means the longer you leave it, the more money you can have when it finally matures. You then have the option to take out the money you have accrued in a lump sum, or you can set it up so that you get a regular “paycheck” from you annuity fund.

Before deciding whether or not annuities are a good idea for you, it’s important that you look at some of the perceived negatives that come with them. One of the biggest problems arises if you need to pull out some or all of the money earlier than expected. You will be hit with a penalty for early withdrawal that averages out at about 7%. If you have to withdraw money within the first few years, that surrender charge can run as high as 20%. You will also have to pay out commission to the person that brokers the annuity, as well as paying annual fees that are associated with variable annuities.

If you have left your retirement saving late, annuities are a good way to put away a lot of money quickly without tax penalties, but you still have to consider the fees before taking that plunge. Before you decide, you should take some time to talk to a financial planner who will be able to give you some real solid advice on what retirement tactic will work best for you and your family.

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