A fixed rate annuity is considered to be a low risk investment because you earn the same rate of interest each year. Your money will accumulate a certain amount of interest for as long as you pay the monthly premium. When you are ready to retire, you can close the account and collect your money. Remember, you have to pay taxes on the interest you have earned.

A variable rate annuity involves a little more risk because you will have options as to the way you want the money to be invested. Depending on the movement of the market, the percentage rate you earn will vary from month to month. You do have the option of moving your money into other annuities to avoid losing a large amount in the stock market. You do not have to pay taxes on the money until you withdraw it.

If you have a 401K or IRA, you may not need to buy any annuities. Because you have to pay a monthly premium, you may not have enough to contribute to other retirement funds. Depending on your current financial situation, choose retirement plans that best fit your needs. Visit RetirementSavingsGuide.com to learn more about your options.

Annuities can be very profitable as you reach retirement age. When you retire, you will be able to withdraw all of it at once or you can choose to receive monthly payments for the rest of your life. Planning for your retirement is important and should not be taken lightly. If you need help planning for your retirement, you should contact a retirement planner or other financial expert when seeking advice.