Finances are a hard thing to manage, whether it is during the younger years when an individual is working, or after retirement when they have no longer get a monthly check from their employer. The difference is that before retirement, the income is fixed, while after retirement, this may not be the case. The secret is to ensure that you invest properly so that the years after retirement are stress free and one can still have enough money to survive as well as to take care of any business that may arise.
One of the options open to the investor is an annuity, and at this point the investor may be wondering, what is annuity? This is an investment option in which the investor agrees with an insurance company by way of contract that they will pay a certain amount of money, and receive regular payments after a certain period of time.
The investor who inquired what is annuity is definitely interested at this point, and may want to know some of the various types of annuities. One of the more popular types is Single Premium Immediate Annuities, and this option is mostly suited for individuals who have already retired. It involves paying one huge lump-sum to the insurance company at once, after which the insurance company begins paying a certain amount of money immediately after all the paper work is completed, usually within thirty days.
This option is interesting, especially for the individual who may have a lot of money, may be because they won the lottery or because they received their pension, and they would not like to spend it all in one store. At this point, the investor who asked what is annuity will want to know more. To explain further, this type of payment exists in two different types; in the first one, the individual receives a fixed payment every month, while in the second option, monthly payments are different depending on the performance of an investment.
The purpose of a Single Premium Immediate Annuity is to ensure that the individual is able to have a stable income after they have retired. The individual who inquired what is annuity may want to know if there are certain benefits to purchasing this type of annuity. The first benefit is that there is an inflation cushion in this type of annuity, especially if you choose the one in which payments are dependent on the performance of underlying mutual funds and stock. This is because this investment options depend on inflation, and if there is inflation, they may increase in value and so will the investor’s annuity.
Also, the investor is guaranteed to get money for the rest of their life and they will never outlive their investment, and this investment will not decrease in value, but there is the possibility that the value may increase. This type of annuity is a wise choice for individuals who have a lot of money which they would like to use wisely without the risk of squandering it, but who would like to start using it immediately, especially if they are retired.