Retirement annuity: Building your nest egg

Whether you like it or not, retirement is a phase in one's life where you will bid goodbye into the life or work you have always known and exit gracefully and join the throng of retirees. This should be the time to enjoy the fruits of your labors for the past decades. Having a retirement annuity spares you the trouble of worrying where to get the next paycheck to meet bills and pay for what you want.

A retirement annuity could either be fixed or variable, and the amount you will receive for a regular period varies between the two categories. Under the fixed retirement annuity, the rate of return you will be receiving remains fixed no matter what. Under the variable retirement annuity, the rate of return varies based on your total contributions.

In fixed retirement annuity, the rate of return you will receive is mainly determined by how much is your total contribution and how much was the interest rate when you bought your retirement annuity. You may start receiving your regular payouts or you may delay it for one month or even up to one year. It is all up to you to decide when you want to start receiving your retirement annuity benefits.

One benefit you can get from retirement annuity is that you have many choices or sources available to buy a retirement annuity. You could buy yourself a retirement annuity through certificates that have matured, or you can source it from funds from your tax-qualified benefits. Your retirement annuity comes with benefits both for you and your annuity provider.

Each annuity investor has different requirements and it is up to you to make the right choice in buying your retirement annuity. One type of retirement annuity that is available in the market is the single premium retirement. This comes packed with benefits that you can enjoy. It has a flexibility advantage and what makes this popular among annuitants is that in the event of your death, your dependents can count on a steady source of income from your retirement annuity. In other words, the benefits do not end when you die because your dependents can go on receiving the benefits.

If you have a retirement annuity, one more advantage you enjoy is that under the current tax law, a specified portion of the payments of the non-qualified annuity benefits you will be receiving from your insurance company is not considered as taxable or until you get the total premium of your annuity. This means you will only be taxed on the remaining amount of payment you receive and it will be treated as an ordinary income. The tax charges will be based on the year it was received.