As millennials, I am wondering how many of you save for retirement via 401(K) or IRA? How much do you save?

Of course, 401(K) is a good way for youngsters to start their retirement plan. I introduced the advantages of 401(K) and IRAs. However, do you know what is an annuity? Have you heard of buying annuities or even have considered to buy an annuity?

Annuity is an important supplement if you want to ensure your retirement life is of high quality.

An annuity is a financial product that issued by financial institutions. An annuity can pay out a fixed stream of payments to an individual. Before payout, you have to invest money in it, which is the same with 401(K) or IRAs. This period of time is called the accumulation phase. Once payment commence, you will enter the annuitization phase. After that, you will be paid.

There many kinds of annuities. In terms of investment, annuities can be categorized into three kinds.

Fixed annuities: These annuities have fixed payments. Usually an insurance company will guarantee you the lowest interest rate between 2% to 3.25%.

Variable annuities: These annuities are regulated by the Securities and Exchange Commission in the US. They allow investment into mutual funds that have variable gains.

Equity-indexed annuities: These annuities provide payments linked to an index. It’s relatively new in the market. The performance of an index determines how much is credited to the customer.

We should plan early for retirement when we are young and can make money. There are many kinds of retirement plans in the market. Whether you decide to participate 401(K) provided by your company or to buy annuities yourselves, always remember to think thoroughly.

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