A retirement account is an extremely popular method individuals use to save money for their later years. A flexible annuity is a retirement account that typically allows individuals to determine how they receive payments at retirement. The methods for depositing money into the account are similar to other requirements; periodic deposits go into an account to earn interest until the withdrawal date. Two major differences exist, however, with a flexible annuity and other retirement accounts. First, the retirement age is not set, allowing the individual to select when to draw payments, and second, an individual can select a lump sum or fixed annual payments.
Financial institutions are the most common businesses that sell flexible annuities and set up retirement accounts for individuals. The account usually requires deposits from users at specific time periods. They typically go into a pool that the financial institution uses to purchase stocks and bonds. The purpose of this pooled money is to gain interest for each individual retirement account, thus growing the flexible annuity amount for the end user. Strict regulations ensure that financial institutions handle each individual’s money properly.
When setting up a flexible annuity, individuals can typically set the retirement date for withdrawing funds. This is a major change from a standard retirement account that requires withdrawals when the individual hits a certain age. For example, standard retirement accounts may require immediate withdrawal payments when the account holder hits age 70. A flexible annuity, however, allows individuals to set the age that best suits them, such as 65, 68, or 72, depending on the account holder’s preferences. This ensures individuals can retire when they choose and not when the government tells them to.
The other major difference between a standard retirement account and a flexible annuity is the payment method. Standard retirement accounts tend to have fixed annual payments as part of the repayment plan for account holders. A flexible annuity, however, allows an individual to select a repayment method that is either a lump sum, periodic payments, or regular payments at fixed intervals. This provides individuals with options for creating planned retirements through the use of funds in a particular manner. In short, the flexible portion of the annuity allows for more freedom by the account holder during retirement.