This is a debatable issue. Many companies offer pension plan as an annuity spread over the life of the employee. Here, the employee is assured of an identified Annuity every month. However, there are other companies who offer lump sum annuity. Both the methods have some advantages and disadvantages.
Lump sum Annuity:
The employer gives one payment as a final settlement of the pension claim of the employee. This is a substantial amount. The entire sum is at the disposal of the employee. Now, it is the wisdom of the employee that matters. If the lump sum annuity is managed properly, then it will generate the same amount of annuity as in the monthly annuity plan. There are many retired persons who have taken Lump sum Annuity and they are doing well because they are properly managing their investment. In fact the investment would pass on to the heirs of the pensioner. The problem arises if it is not properly managed. Then the person will be left with nothing for his living. Therefore, before investing, the pensioner has to take a careful view of the investment plan offered by the investment company. He has to carefully consider the risks involved in the investment. It is advisable that the opinion of an investment planner is also taken in the matter.
Annuity pension plan:
On the contrary, the Annuity pension plan offers monthly income to the investor. Here, the investor is assured of fixed income every month or in identified periodicity. This amount is guaranteed for the life of the investor. Many insurance companies offer additional benefits by way of insurance coverage for the spouse against ailment and accidents. So here the investor need not worry about the investment plan because it is the investment company that worries about it. The disadvantage of this system of Annuity is that the monthly annuity may not be commensurate with the inflation rate. So, in the long run, returns may not be of much help to the pensioner. Further, if the investment company is not wise in its investment, then it is the pensioner who is put to loss and inconvenience. Such incidents have happened earlier.
So it is the wisdom of the pensioner that ultimately prevails. The pensioner is advised to take the considered opinion of an investment expert in the matter.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Whiplash Injury Compensation
Tuesday, June 1, 2010
Types of Annuities
What is Annuity?
It is a fixed amount paid to the beneficiary. The Annuity is paid as a settlement of insurance claim or by way of damages for any torts or by the investor to the beneficiary as a retirement plan. The annuity could be for a particular period of time or for life depending on the type of investment made. If the Annuity is paid as a compensation for accident, then such Annuity will be till the person fully recovers from the injury and is able to take up his normal work. If it is as a retirement plan, then such Annuity will be for life. The amount received as Annuity is not taxable. Therefore the beneficiary need not explain the amount he has received as Annuity and the source from where he got the Annuity.
Types of Annuity:
The amount a person is entitled to as Annuity is dependent upon the type or nature of investment he has made.
Fixed Annuity:
Here the person gets a fixed amount as Annuity. The investor is obliged to pay the fixed amount irrespective of the market fluctuations and the earnings he has made out of the amount invested by the person.
Immediate annuity:
As soon as the investment is made, the amount starts earning and the earning is transferred to the beneficiary. This is a wonderful option for those who want immediate returns from the investment.
Deferred Annuity:
As the very name suggests, the Annuity is deferred to a later date. In other words, the person receives the Annuity at a later date as indicated by him. During this period the Annuity accumulates and the accumulated Annuity will be available for withdrawal with tax benefits.
Equity indexed Annuity:
This Annuity is based on the market fluctuations. But the investor guarantees a particular amount as minimum Annuity. However, depending on the market behavior, the investor may be eligible for higher annuity.
Variable Annuity:
Here the Annuity is dependent on how much the investment has earned in the Stock Market. That means the amount of Annuity a person gets is directly dependent on fluctuations in the Stock market.
Roth IRA:
This is ideal for those who are in higher bracket of tax. Normally, in this category the Annuity is allowed under certain conditions. Usually the duration of this type of investment is five years.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Personal Injury Settlements
It is a fixed amount paid to the beneficiary. The Annuity is paid as a settlement of insurance claim or by way of damages for any torts or by the investor to the beneficiary as a retirement plan. The annuity could be for a particular period of time or for life depending on the type of investment made. If the Annuity is paid as a compensation for accident, then such Annuity will be till the person fully recovers from the injury and is able to take up his normal work. If it is as a retirement plan, then such Annuity will be for life. The amount received as Annuity is not taxable. Therefore the beneficiary need not explain the amount he has received as Annuity and the source from where he got the Annuity.
Types of Annuity:
The amount a person is entitled to as Annuity is dependent upon the type or nature of investment he has made.
Fixed Annuity:
Here the person gets a fixed amount as Annuity. The investor is obliged to pay the fixed amount irrespective of the market fluctuations and the earnings he has made out of the amount invested by the person.
Immediate annuity:
As soon as the investment is made, the amount starts earning and the earning is transferred to the beneficiary. This is a wonderful option for those who want immediate returns from the investment.
Deferred Annuity:
As the very name suggests, the Annuity is deferred to a later date. In other words, the person receives the Annuity at a later date as indicated by him. During this period the Annuity accumulates and the accumulated Annuity will be available for withdrawal with tax benefits.
Equity indexed Annuity:
This Annuity is based on the market fluctuations. But the investor guarantees a particular amount as minimum Annuity. However, depending on the market behavior, the investor may be eligible for higher annuity.
Variable Annuity:
Here the Annuity is dependent on how much the investment has earned in the Stock Market. That means the amount of Annuity a person gets is directly dependent on fluctuations in the Stock market.
Roth IRA:
This is ideal for those who are in higher bracket of tax. Normally, in this category the Annuity is allowed under certain conditions. Usually the duration of this type of investment is five years.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Personal Injury Settlements
Annuity for retired persons
Retirement is a day which every individual will have to face in life. Those who are in employment will have to retire after attaining particular age as mentioned in the service rules. For these persons retirement is mandatory. Even those who are in business have to retire. They cannot continue in business for life and one day or the other they will have to hang up the business because of old age. Life after retirement is something difficult to imagine. Now the person will not have any regular income. He has to meet the daily expenses of the family, his medical expenses, car insurance, the list goes on. Those who have pension benefits are a lucky lot because they have something to hang on in the old age. Those who do not have pension benefits have to plan their retirement well in advance.
What is Annuity?
It is a fixed income a person gets over a period of time. The annuity is normally investment based. There are many types of annuity depending on the type of investment. For retired persons, the most preferred Annuity Plan is the Life Insurance Annuity plan. This annuity continues for life and therefore the person will enjoy the benefit of fixed income for life.
How Annuity is paid?
The entity, be it the employee or the business, invests a particular amount periodically with an investor. The investor in turn reinvests the amount in safe securities, debentures, etc. This results in accumulation of amount by way of dividend, interest, etc. Thus, the amount invested by the investor starts to earn and grow. The amount so accumulated is used to pay the retired person by way of Annuity. Of course here, the wisdom of the investor in investing the amount is the key factor. Normally, retirement annuities have sufficient backing from the government and they are subject to strict laws and scrutiny by the governmental agencies. This is to ensure that the investment of the individual is not misused by the investor.
Advantages of Annuity:
Apart from the fixed income, the amount received as annuity is not taxable. This is one of the greatest reliefs a retired person has. On the contrary interests earned on the amounts invested in Certificates of Deposits (CD) are liable to be taxed.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Purchase Structured Settlements
What is Annuity?
It is a fixed income a person gets over a period of time. The annuity is normally investment based. There are many types of annuity depending on the type of investment. For retired persons, the most preferred Annuity Plan is the Life Insurance Annuity plan. This annuity continues for life and therefore the person will enjoy the benefit of fixed income for life.
How Annuity is paid?
The entity, be it the employee or the business, invests a particular amount periodically with an investor. The investor in turn reinvests the amount in safe securities, debentures, etc. This results in accumulation of amount by way of dividend, interest, etc. Thus, the amount invested by the investor starts to earn and grow. The amount so accumulated is used to pay the retired person by way of Annuity. Of course here, the wisdom of the investor in investing the amount is the key factor. Normally, retirement annuities have sufficient backing from the government and they are subject to strict laws and scrutiny by the governmental agencies. This is to ensure that the investment of the individual is not misused by the investor.
Advantages of Annuity:
Apart from the fixed income, the amount received as annuity is not taxable. This is one of the greatest reliefs a retired person has. On the contrary interests earned on the amounts invested in Certificates of Deposits (CD) are liable to be taxed.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Purchase Structured Settlements
Consider your investment plan carefully
Retirement is a necessary event which everyone faces in life. When one thinks of his income after retirement, several options arise. During his service, the person has to save some amount every month for his retired life. The person invests this amount in Annuity schemes which fetch him some periodical income so that after retirement he can lead a normal life. Before choosing the appropriate investment plan, the person has to evaluate his needs. His immediate commitments like education of children, expenses on health, renovation of house, legal expenses if any are some of the factors which may require careful consideration. The next question that he has to consider is the marriage of children, tour plans, etc.
Where to invest the savings?
This is a vexing question that needs careful consideration. Many employees invest the amount with their employers. In return for this investment, the employer normally gives the employee a fixed amount periodically as Annuity. Of course in the beginning the Annuity which the employee gets would seem to be reasonable. But with inflation, the fixed annuity will not be sufficient in the coming years. Even with an inflation of about 3% every year, in about 4 to 5 years the person will feel the financial crunch.
The alternative is to invest in Stock market. But this requires specialization and careful market analysis. Everyone may not have this quality. So this is a risky investment.
As an alternative, the employee can consider the investment plans offered by different investment companies. Many of the investment agencies have several attractive plans like Annuity with health insurance coverage for the spouse, burglary insurance, etc. Such investment could be another better option to choose.
Some persons may consider investing in real estate. But if such investment is made, the person may not have fixed returns unless the investment fetches him some amount by way of rent. If such investment is made when there is a favorable market, the value of real estate would appreciate and this may fetch attractive returns.
However, as far as investment plan is concerned, all that matters is the wisdom of the investor. Wherever necessary, he can take the guidance of professional investment planners who would be able to guide the investor appropriately.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Lump Sum Payout
Where to invest the savings?
This is a vexing question that needs careful consideration. Many employees invest the amount with their employers. In return for this investment, the employer normally gives the employee a fixed amount periodically as Annuity. Of course in the beginning the Annuity which the employee gets would seem to be reasonable. But with inflation, the fixed annuity will not be sufficient in the coming years. Even with an inflation of about 3% every year, in about 4 to 5 years the person will feel the financial crunch.
The alternative is to invest in Stock market. But this requires specialization and careful market analysis. Everyone may not have this quality. So this is a risky investment.
As an alternative, the employee can consider the investment plans offered by different investment companies. Many of the investment agencies have several attractive plans like Annuity with health insurance coverage for the spouse, burglary insurance, etc. Such investment could be another better option to choose.
Some persons may consider investing in real estate. But if such investment is made, the person may not have fixed returns unless the investment fetches him some amount by way of rent. If such investment is made when there is a favorable market, the value of real estate would appreciate and this may fetch attractive returns.
However, as far as investment plan is concerned, all that matters is the wisdom of the investor. Wherever necessary, he can take the guidance of professional investment planners who would be able to guide the investor appropriately.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Lump Sum Payout
Structured Annuity Settlement
What is structured settlement?
This is a term generally used in insurance settlement. Insurance settlements are normally one time settlements given to the affected party or the claimant. The structured Annuity settlement (also called as ‘Structured settlement’) can be called as an extension of the benefits over a longer period of time. In other words, the victim gets a fixed amount periodically instead of getting the money in one lump sum. Such periodical income would normally last till he fully recovers and is able to take up his normal work.
Legal aspect:
It is said that the concept of structured settlement was first practiced in Canada in 1970. Later several other countries resorted to this procedure. Considering the advantage of this form of payment of compensation to the accident victims, several countries passed laws to legalize the Structured Annuity Settlement. This type of structured settlement is also called as ‘periodic payment judgment’. The Annuity is decided depending on the nature of injury, time normally taken to fully recover, type of immobility of the victim, the status of the victim, etc.
Structured Annuity settlement Vs one time settlement:
In one time settlement, the victim has to suit his budget to the compensation received. This is particularly difficult when the victim is immobilized for longer duration of time. The victim will have to manage the medical expenses, domestic expenses, etc. within the compensation received and there is likelihood of the funds depleting. Instead, under the Structured Annuity settlement, the victim gets the compensation for a longer duration. He is assured of some periodical income till he recovers. With this amount, the victim can maintain his family, pay children’s school fees, the expenses towards food, medical expenses, etc. As a result, the victim’s daily life is not affected. Now this type of settlement is becoming more and more popular.
How to claim structured Annuity settlement?
There are several financial agencies and attorneys who are specialized in such cases. They will guide the claimant about the procedure to be followed in claiming the amount. Of course, they will charge a small amount as their consultation fee.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Sell Structured Insurance Settlement
This is a term generally used in insurance settlement. Insurance settlements are normally one time settlements given to the affected party or the claimant. The structured Annuity settlement (also called as ‘Structured settlement’) can be called as an extension of the benefits over a longer period of time. In other words, the victim gets a fixed amount periodically instead of getting the money in one lump sum. Such periodical income would normally last till he fully recovers and is able to take up his normal work.
Legal aspect:
It is said that the concept of structured settlement was first practiced in Canada in 1970. Later several other countries resorted to this procedure. Considering the advantage of this form of payment of compensation to the accident victims, several countries passed laws to legalize the Structured Annuity Settlement. This type of structured settlement is also called as ‘periodic payment judgment’. The Annuity is decided depending on the nature of injury, time normally taken to fully recover, type of immobility of the victim, the status of the victim, etc.
Structured Annuity settlement Vs one time settlement:
In one time settlement, the victim has to suit his budget to the compensation received. This is particularly difficult when the victim is immobilized for longer duration of time. The victim will have to manage the medical expenses, domestic expenses, etc. within the compensation received and there is likelihood of the funds depleting. Instead, under the Structured Annuity settlement, the victim gets the compensation for a longer duration. He is assured of some periodical income till he recovers. With this amount, the victim can maintain his family, pay children’s school fees, the expenses towards food, medical expenses, etc. As a result, the victim’s daily life is not affected. Now this type of settlement is becoming more and more popular.
How to claim structured Annuity settlement?
There are several financial agencies and attorneys who are specialized in such cases. They will guide the claimant about the procedure to be followed in claiming the amount. Of course, they will charge a small amount as their consultation fee.
Brian Sibet also writes about Retirement Planning and Annuities including Lump Sum Annuity and Sell Structured Insurance Settlement
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