Retirement annuity is a contract between insurance company and client; it provides for the payment of a fixed sum of money for life or a specified period of time after the client reaches retirement age.
Investing in retirement annuity can be a smart choice for those who want a stable income in retirement. However, one should remember that investments always involve the risk of losing part or all invested amount. Therefore, before deciding to purchase retirement annuity, one should carefully study the agreement terms and assess their opportunities and risks.
When RA is a wise investment
Retirement annuity can be useful if you want to provide yourself with a stable and guaranteed income in retirement, especially if you have no other sources of stable income.
If you strive for a carefree life in retirement and want extra income, retirement annuity can provide that financial cushion.
Some types of annuities provide inflation protection or guarantee that money will be paid off in the event of annuity owner's premature death.
However, before purchasing retirement annuity, it is important to remember the following”:
Some annuities may have high fees and charges, therefore it is important to learn the terms and costs carefully.
In most cases, the funds invested in retirement annuity cannot be easily withdrawn, so make sure you have enough other liquid funds to cover unexpected expenses.
Before purchasing a retirement annuity, it is recommended that you discuss the matter with a financial advisor to ensure that the life insurance company is reliable and the interest rates are reasonable.
Source: https://www.cnbc.com/select/what-is-an-annuity/
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