Annuities can be the best way to ensure a regular stream of income in retirement but only if you choose the right kind of annuity product for your needs. These days, there are available a wide range of products labeled retirement annuities, and some are much better than others. Some benefits of a retirement annuity is that it provides a guaranteed lifetime income, provides inflation protection to some extent, combines savings and insurance, guarantees returns, offers better tax savings. But, any person who is looking to invest in annuities must keep in mind that annuities should not be taken for granted.  Since there are a wide range of products available, choosing the wrong type can prove to be inflexible and it will also not maximise your retirement income.

If you are in the market for an annuity, then there are some important things that you must know about them.  Let us look at these important facts.

1.  An annuity is a financial product which is sold by an insurance company to an individual and allows the individual invest money which will increase every year without the need to pay taxes.  Once the required funds have been accumulated in the account, it will trigger a stream of income that will be paid to the individual on a regular basis for the rest of his life.  The payments that are received are taxed just like ordinary income. Unlike IRAs, there are no limitations on how much money you can invest in an annuity.

2. One of the best things about retirement annuities is that they produce a steady flow of income that you cannot outlive.  You will be able to get attractive returns on your investment that you would otherwise not be able to get on your own.

3. Insurance companies make money from the annuity fees and other service fees you pay.  When you make your investment, they keep whatever payment has been made above the payment that has been guaranteed to you.  Moreover, if you pass away, they will get to keep any remaining funds that are still in your annuity account unless you have a beneficiary.

4. Annuities are not simple financial products.  The rules surrounding them can be quite complicated.  For this reason, it is always a good idea to consult an independent financial advisor and purchase the right product.  Since there are so many annuity providers available, some may not be as financially strong as the others.  When you purchase an annuity, you will have to make sure that the company has a good financial standing and that it can provide you with a regular stream of income for as long as you live.

5.  There are different types of annuities available.  Annuities can be divided into two major categories and further broken down into many other subcategories.  The major categories include deferred and immediate annuities.  Under deferred annuities, your payout will start at a future date and under immediate annuities, it will start as soon as funds have been accumulated into the account.

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