Understanding annuities is essential for your retirement income planning as they are probably the most common method for insuring a stable retirement income.
After the recent stock market and financial industry's implosion many baby boomers are reconsidering these retirement instruments. Annuities have been around in one form or another for several hundred years. They were first used in medieval times in Germany and Holland and have now evolved into viable retirement income sources for people all over the globe.
Basically, an annuity is a contract between an annuitant (you) and the annuity provider (usually an insurance company) where you make a lump-sum payment or series of payments and the insurer agrees to give you periodic payments starting either immediately or at a later date.
What I'll do here is give you an overview of some of the key ingredients of these retirement income devices and link you to other websites where you can dig deeper.
Understanding annuities is not all that difficult for we baby boomers as long as you know some basic facts:
The Wharton School of business has an excellent 11 page white paper entitled "Investing Your Lump Sum at Retirement" that could be very helpful to you. Although it was co-sponsered by New York Life Insurance Company, I think you will find it very useful if you are considering using annuities to fund your retirement. You can down load it here.
As you can see understanding annuities doesn't require a baby boomer to be a rocket scientist to figure them out but it is best to do some homework on your part before making a purchasing decision.
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