It is very important to prepare for your retirement years well in advance. You need to think of a time when you will no longer have a steady income to depend on and plan on the financial aspect during those forthcoming days. One of the most advantageous schemes that could be most beneficial to you in your retired life is a retirement annuity. Availing of this could help you to enjoy life to the utmost without worrying about cash crunch.

Retirement annuities, which are basically contribution retirement accounts, are dealt with by life insurance companies and come with a lot of guaranteed advantages.

One great benefit provided by retirement annuities are that unlike other forms of savings that offer limited returns and are depended on the interest levels, this form of investment is independent of interest rate fluctuations in the market, thereby helping you to sustain the same level of income at all times. When you invest in a retirement annuity, the insurance provider is bound to guarantee you a fixed income on a yearly basis after retirement. Another benefit of investing in this plan is that the income that is earned within a retirement annuity is absolutely tax free till withdrawal, an advantage which will ensure high growth of your investment.

Of course, as with any other retirement plan, there are minor setbacks too and the major one is the cost factor. In comparison to other savings schemes like mutual funds for instance, the annual fee charged for retirement annuities are far greater and come to about 3% per year. Moreover, if you withdraw the money before the stipulated time, you are also liable to pay about 10% early withdrawal charges.

A retirement annuity can be availed of through a specific provider by paying a predetermined lump sum from the pension fund, the returns of which will be obtained within a month onwards. But one needs to be careful before selecting a retirement annuity plan because the returns you get depends on the plan you choose and varying companies come up with varying products and plans that differ in the rates of returns and payments. It therefore makes a lot of sense in comparing various companies and the returns they offer before signing up for a retirement annuity plan to help you in your retirement years.

Before you go in for a retirement annuity plan, you need to consider what exactly you are looking to obtain from it. In some cases, it could be a fixed monthly income to tide you through the retirement years, while others may look out for a tax sheltered growth plan with minimum risks. Whatever your intention, make sure that you rope in the services of a financial consultant who is an expert in retirement annuities before making a decision so as to get the maximum possible benefit out of your hard earned money.