One way that many people are financing their retirement plans is by investing in a life annuity. The individual contributes during their working life when they have steady income to this fund. The difference between investing in an annuity and socking the money into a savings account is that your investment will grow and earn income, as well as the benefit that the investment money is tax-free until you withdraw it. Once you retire you can receive payments, at this point the money is considered income and will be taxed only as that instead of a capital gain.
Once you begin receiving payments from the life annuity, you will have a steady income to depend on throughout your retirement to supplement the social security and assist in paying the medical expenses that Medicare does not cover. If you are preparing for retirement and have a lump sum of money saved up, you can also purchase a life annuity with a one-time payment instead of paying in over the years. There are many options, levels and types of life annuities that you should discuss with your financial planner, and family and insurance company to ensure that you make the best choice for your retirement expenses.
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