Annuities 101 - For a Better Understanding

Annuities 101 is a guide to give you the clear idea about annuities and on better investments. An annuity is an understanding between you and your insurance company, who would help you to get returns on the invested money in the company. It is a retirement benefit plan which also helps you enjoy the compound interest, tax - deferred. The literal meaning of the word annuity is annual payments. The insurance company allows you to get periodic returns from the money invested in the company.

In most cases annuities allow withdrawal at least once a year without paying company withdrawal charges (10-15 of the accumulated money). The other way to receive your income is through systematic withdrawals. Systematic withdrawal program allows the investor to get a flow of money monthly, quarterly or yearly depending on the choice of the investor. Not only this by opting systematic withdrawal plan one can start or stop the income payments with the needs. You can also get your amount of payments increased or decreased accordingly. Without giving up the control over your money you can enjoy the benefits of deferred tax. Even though the exhaustion of your earnings, tax - free return of principal remains.

Annuities are less understood by people have developed certain myths regarding it. Some of the people have the conception that if they die, their money remains with the annuity company. To add on to this some also think that Annuities are too expensive and unaffordable. To break these notions Annuity 101 provides guidelines and channelizes the thoughts to the proper sources, where there are less chances of getting misled.

The three trends making annuities an increasingly important retirement plan:

· The US life expectancy has gone up according to the recent records on the release of disease control and prevention methods.
· Fewer Americans are covered conventional pension plans.
· The qualifying for taking social security has increased.
· To bring it into a nutshell recognizing retirement income has become more of an individual responsibility.

Therefore it can be well concluded that an annuity plan is an investment plan not only for the rich but also for the poor.