Thus, I’m now looking for an investment option which will allow me to increase my savings as much as possible. An annuity, which is a savings account that is set up with an insurance company instead of a bank, drew my attention. Annuities come with an option that protects our investment regardless of the state of our economy and it guarantees payments for life, even if we live past the life span calculated by the issuer.
There are many kinds of annuities but they all fall into two categories: an immediate annuity which begins payouts almost immediately after purchasing the annuity, and a deferred annuity that’s established over a period time before payouts begin.
An immediate annuity requires a single deposit into an annuity account. We could then choose to receive payouts for a life time, or we could choose a “period certain only annuity” where we’d receive payouts for a selected time span only.
A deferred annuity is for someone who chooses to make smaller payments into an annuity during pre-retirement years. The money grows on a tax-deferred basis at an interest rate determined by the issuer.
One important consideration is there are maintenance fees involved which could cancel out some of the advantages of an annuity. Some good advice is to be prepared to resist making withdrawals as doing this could cut into the value of that annuity in a major way.
Talk to experts and research the prospective companies before making any decisions. It’s clear to me, however, that purchasing annuities is a good way to supplement income during retirement.