What are your options on lump sum annuity?
- Author Brian Sibet
- Published May 25, 2010
- Word count 435
We work all our lives to reach retirement age. All throughout, the plan is to have a peaceful time in one’s prime. But in order to live that picture postcard life there are certain important decisions that have to be thought of. How you receive your pension is an important one. Would you like to receive it as a lump sum or would you prefer a fixed interest rate, payable monthly?
If you do decide to opt for a lump sum payout, this could result in a substantial amount of money. You will have to make the right plans for investment. This could mean hiring someone with the capabilities of planning your finances long term. You, after all, will not be having a monthly salary drop into your account anymore.
An advantage to living off the interest of your annuity is that you do not have to worry about the principal amount dwindling. You can take full advantage of the interest rates. Opting for a full payout should be considered only if you are absolutely sure of your investment decisions. You wouldn’t want a lifetime’s worth of savings to be lost out to bad investments.
The monthly annuity scheme works somewhat like getting a salary each month. But it too has its flip side. With a fixed income, you will not be able to factor in inflation. The expenses that you have comfortably covered for a while may not be within your reach for the same amount, in a few years time. Your buying power is bound to decline in a few years.
Another thing that happens when you opt for a monthly payment from your annuity is that your principal amount is stuck at the prevailing rate of interest as when you signed on. Considering the presence financial situation, these rates are often quite low. If you had a taken out a lump sum payment, you could invest it where the returns could be better. You will also have the flexibility of reinvesting when needed. This way you can still have money for your expenses and have some put away to accumulate interest.
Keep in mind that your annuity payments are liable to taxation. Each monthly payment incurs a tax which you are duty-bound to pay. An option would be to take the whole amount and invest it in IRA. This allows you to pay tax only on the amount you withdraw and not the complete figure. Taxes that are incurred with an IRA account will be substantially lower than annuity payouts. You will have to think all these options through.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Sell Structured Insurance Settlement
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- 3 Great Passive Income Ideas for New Moms and Dads in 2024
- Avrex IO Redefines Real Estate Investment with Innovative Tokenized Ownership Approach
- Panama City's Real Estate Market: Top Neighborhoods for Investment
- Investing in a Condo or Villa in Pattaya, Thailand
- Tabania Group Rings in the New Year with a Powerhouse of Financial Services, Unveiling a Comprehensive Suite for the Digital Age
- To What Extent Has Economic Growth Improved Quality of Life?
- How to Manifest Wealth in Your Life
- Unlocking the Potential: Making Money Online with Your Phone”
- Blue economy of the world
- This Financial “FORMula” Will Help You Plan Around What Matters Most
- Losing a Parent: A Checklist and Timeline of the Financial Aspects to Address
- How to Avoid Lifestyle Creep: Try this 50/50 Rule for Saving & Spending
- (Money) Date Night: Why You Need One and 5 Topics to Discuss
- Private Placement Life Insurance (PPLI) in Offshore Trust More Useful Than Ever
- Indexed Insurance Policies Hedge against Inflation
- Should You Invest Abroad? A Complete Guide to Buying Investment Properties in Thailand
- What Are Your Retirement Planning Options?
- Daily Income Opportunity With U-Farm
- Building a Comfortable Retirement: Tips and Strategies for Investing in Your Future.
- Revocable Living Dynasty Trust (RLDT)
- Key Retirement & Estate Planning Tools
- Captive Insurance -- Details
- INDEXED UNIVERSAL LIFE INSURANCE (IUL) ADAPTS TO INFLATION AND HIGH INTEREST RATES
- GRANTOR ACCESS TO IRREVOCABLE TRUSTS -- EASE THE STRESS OF COMPLETED GIFTS
- CASH BALANCE PLUS PLAN
- Tax-Free Income Making More Sense in Global Financial Crisis
- Dynasty Trusts Guard Personal Autonomy in Hierarchic Society
- Captive Insurance Company, CIC -- Reduce Taxes and Build Wealth
- What is an RESP?
- Private Placement Life Insurance, PPLI