Annuities Basics

Everything you need to know to make annuities part of your compensation package

Annuities basics cover what an annuity is and how to purchase the best plan. Annuities are policies in which you put money and when you retire, the policy then pays you an income. The trick is picking the correct payment structure and compensation plan. Variable annuities have the potential to pay out much higher but they can also drop in value. Fixed annuities as the name implies guarantees a certain rate of payment.

Choose a lump sum distribution or have the annuity pay over time. If you pay over time, then you can pick a certain period to receive the annuity, called period certain. Of course, the payments will be less but the policy covers your employee for the period picked, even if he dies during that time. Picking the lifetime of the annuitant guarantees payment during that person's life. Alternatively, pick lifetime of annuitant and spouse to cover both spouses. Look for the following annuities basics:

1. Choose lump sum payments or pay over time into the annuity with payroll deduction.

2. Select the terms of the annuity payment.

3. Check annuity rates and maintenance fees for the plan.

Pick annuity companies that offer diverse plans

Your employees have different needs, so choose companies that offer some choice in the plans they offer. Find out if you can change the plan during the term, since circumstances change, and offer the best plans to your employees.

Get annuities information to find the best terms for your employees

Some employees will need a lifetime of payments to support them throughout retirement. Others will need a lump sum distribution to pay off debts before beginning retirement. Still others are concerned about the welfare of the spouse and children. Pick a plan that addresses all of these needs.

Find the best annuity quotes with the highest interest rate and lowest service charge

Annuities can vary from company to company and fund to fund so look at what the fund is paying. The company handling the annuity will charge a service charge and a maintenance fee to maintain the account. Shop around for the best deals in annuities.

• Before you add retirement annuities to your list of benefits, ask for a prospectus and read it carefully. Make sure you also distribute the prospectus to your employees so they are knowledgeable about their plan.

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