Annuity Payment: The Planned Pension

2007-03-08 10:33:40

( Financial )



Annuity payment is the regular cash you receive when you buy annuities. It acts very similar to a pension plan in which you are guaranteed to receive a regular and fixed amount for a certain period of time, usually for the rest of your life.

INTEREST FOR AN INVESTMENT

You receive an annuity payment as a direct result of a one-time cash investment you make for the purposes of retirement. This lump sum investment earns interest over time. The annuity payment you receive highly depends on the prevailing interest rates when the annuity purchase was made. Therefore, it is a good time to buy annuities when the current market interest rates are high. This assures you a relatively high return on your investment when the annuity reaches maturity.

Because our society places a high importance for the quality of life upon retirement, there is a huge market for annuities as a viable source of retirement funds. Companies offering annuity services try to win your business by offering value-added features and promising interest rates that are slightly better than the levels of the current market. And given this highly competitive nature of the business, the interest rates being offered by one company from another can vary greatly, so make sure to do some canvassing first.

RETIRED AND SECURED

Since annuity is designed especially for those who are nearing retirement, you can buy annuities if you are about fifty years old or so, depending on your occupation.

When purchasing an annuity, it makes sense to factor in your overall health condition. If you have some health issues which may compromise your life expectancy, it may be better to opt for higher or increasing annuity payment rates distributed over a definite period of time. If you have no illnesses and have good life expectancy, a fixed annuity payment given over an indefinite term may work best.


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