In years past employers would set up and provide the annuity for their employees. However, they were not called annuities, but rather called a pension. They functioned in the same way. Part of every paycheck was paid into the pension, and at the time of retirement the employee would receive guaranteed income for life. Since the pension has been largely replaced by the 401k, it is now up to the employee to find his own annuity for retirement planning. The downside is that when the interest rates are low, such as they are now, annuities will not be paying out quite as much per year as when they are higher. Many financial professionals will advise a person to get annuity quotes in the amounts that are required to cover living expenses. That way the basics are covered, and the rest of the money can stay in the rollover IRA and be invested for later use if onetime expenses come up.
Another option that has been gaining popularity is the split annuity. In this case the individual will get annuity quotes for about half of their living expenses, or sometimes even less. They will start an annuity now at the reduced rate, one that will last for a 10 year period. When the rates go back up, the individual will get new annuity quotes for another income stream that will cover the rest of the living expenses. Setting up their annuity this way will create an income stream now, and boost it in a few years with one that is earning more interest.
Pensions may not be a part of many American jobs anymore, but the idea is still around. Most people seem to ignore annuities and have not adapted them into their retirement planning. However, these products have gone largely unused. Setting them up properly can help any individual maximize their retirement planning, and many financial professionals will talk about putting at least a portion of money into an annuity. If you are approaching retirement, an annuity is well worth looking into.
If you are interested in finding out the present value of an annuity there are several online calculators out there that you can use. Have you ever thought about adding an annuity to your retirement plan?
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