What Is An Annuity?

With planning, an annuity can compliment your retirement savings to give you a good balance of protection, growth and income for the rest of your life.

Retirement may seem far off, or it may seem like an all too near future. When that day comes, if you are still alive, you will need a plan for what to do to be able to have enough money to live. For a few short decades in the 20th Century, there was the belief that pensions from private companies would provide for the needs of workers. The promises that those companies made are turning out to be worthless. We will figure out how to survive no matter what the circumstances.

Today, there are many, many different ways for companies to help you save towards retirement. The smartest are IRA's. Any financial person will tell you that your first step is to max out your contribution to your IRA and 401(k). You can, and should, pay monthly into one of these plans.

After you have maxed out your contribution to your IRA and/or 401(k), your next stop should be a variable annuity. An annuity works like a pension was supposed to work. So use the tools at hand as they are best intended. By providing for your own pension through an annuity, you provide security for yourself and your family for the rest of your life. A retirement savings plan and an annuity can be the building blocks upon which you build a solid retirement portfolio to let you enjoy your last years.

Approach your retirement like you approach your other financial needs: there are things that you have to have and things that you want.

In light of the financial events of the last few decades, the government has designed tools to allow, and encourage, you to save for retirement. Before investing in any other scheme, you should max out your government tax sheltered accounts. A variable annuity does not have all the tax benefits of an IRA but it does have some. With a variable annuity, the tax on gains is deferred until you start getting paid. Only the interest on a variable annuity is taxed. With a little advance planning, you can save yourself and your heirs lots of money. So choose your annuity wisely. By retirement, your children will be grown, your house will either be paid off or you can do a reverse mortgage, and your car expenses will drop dramatically. So your needs will be less.

After you have saved diligently in safe investments to build a solid foundation, you can use the rest of any money that you can put aside in more aggressive investments. Or gold. Since this is not money that you will need for your light bill, you can take more chances to reap greater rewards.

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