Annuities can make life much easier as you reach retirement. Their function is to give you a stable income – either for a predetermined period of time, or for the rest of your life. Annuities come in different shapes and sizes, and this allows for them to be a great asset to your retirement account.
How Do Annuities Work?
Annuities are payments disbursed according to a chosen schedule in exchange for an investment, or series of investments.
The money you contribute to your annuity is known as capital. That accounts for a portion of what you receive in annuities, but it’s not the only component. You also earn interest and/or capital gains on what you contributed.
You can choose between a monthly, quarterly, semiannual, or annual payment schedule. Payments will be smaller the more frequently you receive them.
What Are The Types Of Annuities?
Annuities come in these forms:
- Life
- Term-certain
- Variable
Life annuities are effective throughout your lifetime. It’s guaranteed income for as long as you live. However, what remains after you pass away will not go toward your beneficiaries unless you attach a provision for an extra fee.
Term-certain annuities disburse payments for a given number of years. Unlike life annuities, your loved ones will get what is left of your annuities if you pass away before the term ends.
Variable annuities involve an investment component, in which your capital is invested. You still get a guaranteed fixed payment, with the other portion coming from capital gains. The fixed portion of the payment is smaller in comparison to the other annuity types.
How Can I Incorporate Annuities In My Retirement Plan?
You can contribute to annuities with more than what you’ve earned through employment. The additional amounts you’ve earned through other retirement accounts, such as Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs), can be used to fund your annuities.
In fact, it is common for individuals to convert their RRSPs into annuities once they reach 71 years of age, as RRSPs are not usable after an individual is 71 years old. Annuities can serve to continue the savings path you started years ago.
With an annuity, you have a reliable source of supplemental income that will always be there. You won’t have to worry about the possibility of running out of your savings.
Retire Comfortably And Let Your Money Work For You
At Fidusure Financial, we will help you cover all the bases when it comes to your retirement. We devote our best efforts to devising a retirement plan that eliminates financial anxiety, so that you can have the quality retirement you deserve. Call us today at (647) 567-4702.