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When an employee retires, the employer offers monetary retirement benefits such as pension and cash balance plan, as a gesture of gratitude for the employees service. Many people like to invest their retirement package in an insurance company, on the condition that their money is paid to them back on a regular basis. They `buy this arrangement, known as an `Annuity, from the insurance company. By going in for an annuity, the investor is assured of a regular income through retirement, or thereafter to his heirs. But this income, usually monthly, is based on the payment option that he chooses. Though an annuity offers a regular monthly income to the investor, it cannot meet his immediate financial needs, like buying a home. In such circumstances people think, \"Which is better, receiving a large amount of money today after paying taxes, or receiving an annuity as monthly payments for many years and paying taxes each year? Lets sort the dilemma out by considering an example as follows. James wins $1 million in a lottery. The lottery company asks him to choose from the two options: a lump sum payment once, or annual payments of $75,000 for 30 years. Let the rate of income tax be 30%. If he chooses the first, his after-tax amount is $700,000. If he chooses the second, receiving $75,000 every year for 30 years, its income is far less considering inflation, tax and other unpredictable factors for the 30 years period. Obviously, the first option is better.Accredited banks http://www.articlesfactory.com/pic/x.gif" alt="Free Articles" border="0">, insurance firms and finance companies and their websites have ready online annuity calculators to help investors make a good choice.
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Can Your Annuity Do This?
Many people buy annuities according to their agent s recommendations. However, many people do not even know what they own. It is a good idea to take inventory of your investments, and particularly your annuity. It is important to understand what your annuity can and cannot do and what features it has. Here are some of the things you definitely must be sure to know about your annuity:
1. What interest rates are you currently getting?
2. Are the interest rates getting worse?
3. What is the rating of your insurance company? (Critical)
4. What are your surrender charges?
5. Is your principal ev ..
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When an employee retires, the employer offers monetary retirement benefits, such as a pension or cash balance plan, as a gesture of gratitude for the employees service. Many people like to invest their retirement packages in insurance companies, on the condition that their money is paid back to them on a regular basis. The investor `buys this arrangement, known as an annuity, from the insurance company. By going in for an annuity, the investor is assured of a regular income through retirement, or thereaft ..
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