Annuities Simplified – What is an annuity?

An annuity is simply a contract whereby for a fee you are guaranteed an income for the entirety of your retired life. The regular income from an annuity can give you security for when you retire. Annuities should not be taken lightly though and it is always advised that you take the advice of a professional before decide to take up any annuities.

How will you benefit from an annuity?

• It will give you (plus your partner or spouse) security in order to let you live the retirement you always dreamed of
• You are able to select the frequency of the payments, either monthly, quarterly or annually
• Spousal benefits are one option which will be available to you

What are the types of annuities?

You will find three different types of annuities available, these are:

• Fixed Annuities
• Variable Annuities
• Indexed Annuities

Fixed Annuities

This option carries minimal risk and will give a specific return over a fixed time period. These fixed rate annuities are perfect for older people that are looking a straightforward way to get a set amount of money in retirement.

Variable Annuities

With this option your moneys may be split up and invested in different areas. Obviously this kind of annuity carries more risk and the payouts depend on the quality of the investments and market performance. Much like the majority of investment it comes with an element of risk, but there is also the possibility for greater returns. When selecting a variable annuity you need to be willing to take a little risk!

Indexed Annuities

Indexed annuities use a rate tied to a financial market index.

The different kinds of annuities often mean that it can be difficult for people to decide if:

• They need an annuity
• Which of the annuities available is best suited for their requirements

It is usually advisable to obtain some expert advice from a financial advisor who should be able to guide you towards the annuity that is best suited for you (often according to your age, lifestyle, personality, financial situation etc.). It is very important that you way up the advantages of each of the annuities options carefully to make sure you will be happy with your decision. Once you have bought an annuity there is no going back.

For this reason it is very important that you choose your annuities carefully, if you do, there isn’t any reason why you cannot fully enjoy your retirement without the money worries.

This guest post was written on behalf of Robert Bruce Associates, leading independent financial advisors, and experts in annuities. For more pension advice, please visit rbifa.co.uk.