Investing in a lump sum annuity is a commendable way to prepare for your after-retirement life or to save for any event like child's college fund that may come up in future. As an additional benefit, you also save heavily on tax by investing in annuities.
By definition, and annuity is an agreement or contract – usually with an investment or an insurance company – where the company is bound to pay a fixed payment after a determined period of time. The payment that is made can either be taken as a lump sum amount or in portions over the period of time, the choice is entirely yours. The law states that the withdrawals can not be made until you reach an age of 59.. In case the withdrawal is made before this age, the surrender charges and tax penalties are applied.
Opting for lump sum annuity option can be quite tempting as in this case you get the full pension amount immediately after the retirement. You get the freedom to use this money in the way you want. Since the amount you get is lump sum you can either use it according to your plans or invest it further in order to receive benefits
Proper planning and money management are quite important so that you do not end up risking or losing all your money. A financial advisor can help you in taking the right decision and also brief you about various investment options, market value, investment products, inflation rate and other events around.
A lot of people think of taking the whole amount at once can be a bit risky as future always remains undecided. Therefore these people opt for monthly payments scheme. As a matter of fact, the market is suffering from low interest rates and it is a possibility that by opting for a fixed-rate annuity option you may receive monthly payments according to current interest rates. With lump sum annuity option you can consider going for a short-term investments until the rate increases so that you can invest a part of your money later.
Whether you choose to receive your money in monthly checks or as a lump sum amount, it is meant to make your retirement life better. It is important that you opt for a good annuity plan when you're quite young so that your retirement remains worry free.