What You should know About Retirement Annuity

A good percentage of citizens in the world at large is elderly people. This set of individuals would retire from their daily job or progression at a certain stage in their lives causing them to rely on their savings for daily upkeep. A Retirement annuity plan is a product of finance that fits this need all too well.

It is a financial plan which ensures that regular income earners who later become retirees later in life have the opportunity to have income issued to them after retirement.

It’s often distributed after being issued to them by an insurance company.

The idea behind this is to serve as a backup for these retirees who can no longer work or fend for themselves at that certain point in their lives making it easier for them.

 In case you are considering what would be a good financial plan after retirement, this is the one.

Retirement annuity contributions are saved up for life to protect the insured person.

This is a plan that supports you in getting a regular payment for life after contributing a lump sum investment.

When this is done, the life insurance company would then use the money of the investor to invest and the money generated from it would be returned to the investor.

 After a person retires, two-thirds of the retirement annuity has to be used to purchase an annuity, this will pay you an income in retirement. Either with a fixed annuity or a life annuity, your lump sum would be capable of buying you a set and expected income. For as long as you live, a single life annuity will pay you an income. Great right? It is actually.

Low-cost Fixed and Variable Annuities 

These types of annuity work based on different conditions and most of the time, they are the best and favorable options as part of a retirement portfolio. The variable annuities monthly payments are annuities that will fluctuate at certain times with a variable annuity, while the fixed annuities are annuities that pay out a particular amount monthly. Although no annuity is insured or protected it can be considered safe investments.

Why Is Retirement Annuity an Effective Way of Saving for Retirement?

  Before going into any type of insurance plan, it’s important to know its benefits and effectiveness as you will need to be convinced that you would get suitable benefits.

• Your savings provide you with an income in your retirement years:

                   According to current legislation, one-third of a retirement benefit accumulated in savings should be taken as a lump sum by the retiree and the balance will be used in providing regular pension payments.

• You get to save tax:

Your taxable income would be reduced up to a specific limit because your retirement annuity contributions as part of your contributions will come from your tax savings, this is beneficial because the South African Revenue Service (SARS) actually will be paying a part of your retirement savings. And also, the growth on your investment would be tax-free.

• Your savings are protected from your creditors:

A personal benefit to enjoy is that your creditors would not have access to your savings and your benefit would be safe irrespective of any loss you may suffer financially. This is to ensure that your savings will be ready and available for what it is intended for and also when it is most needed.

Other Ways of Saving for Retirement Annuity 

• By adding some of the bonus payments you receive to your retirement annuity, you would be expecting a better income during retirement 

• After deduction of allowable expenses, rental income can be added to taxable income. 
• Dividends that have been earned from any Real Estate Investment Trusts (REITs) can be included as they are subject to income tax in the taxpayer’s hands
• Any type of gains derived from realizing capital assets

Conclusion 

    There are several reasons you could be receiving a particular income from a life or living annuity even while you are still working. In cases like if you may have retired early from a fund and then receive an income from the annuity, another is if you may have inherited some sort of annuity from a family member. It is advisable to start saving for retirement early to accumulate a worthy sum.  And if you find it difficult to save the recommended amount, then saving whatever you can afford is also a good start.

Other Resources: Retirement Annuity | Professional Liability Insurance | Best Life Insurance Companies for Young Adults | 7 Types of Insurance Covers | Car Insurance | Health Insurance | Why Do You Need Income Protection Policy | Household Insurance Cover | Taxation of Insurance Policies | Choosing the Right Insurance Cover | Insurance Cover in SA