When this quote was made, Abe Lemons was pointing to the fact that retirement is a period when you finally get a chance to fulfill your pent-up desires. Be it learning crotchet, or trying your hands at gardening; retirement is a period when we have plenty of time to pursue our favorite activities.

However, we must also remember that one can live an active and fun-filled retired life only if it is backed by a sufficient degree of financial independence. Take the example of Mr. Smith. At the age of 75, he enjoys his thrice-a week guitar classes. On the other hand, his 70-year-old neighbor, Mr. Robinson had to leave the class midway. The reason was paucity of funds. He had not prepared a proper retirement plan and was now facing an acute financial crunch.

If you want to enjoy your retired life, then you ought to give a serious thought to investments. And when one talks of investment, especially for retired people, then retirement annuity hogs the limelight.

But why does retirement annuity feature as a prominent choice? After all, retired people also have the option of investing their funds in stock markets and Certificate of Deposit [CDs]. The reason for the growing popularity of retirement annuity is that it offers a decent amount of returns coupled with a safety net over your capital.

The stock markets, of late, are taking investors on a roller coaster ride and many have already burnt their fingers. The recent bankruptcy of some high profile companies has made investing in company stocks a risky proposition. However, many retired people want their investments to protect their capital as well as bring in some decent earnings. Retirement annuity rises to meet both these criteria.

Retirement annuity is a contract between you and the insurance company wherein the company promises to pay you an assured sum of money in lieu of the premiums paid by you. Retirement annuity offers a wide range of option. For instance, you can choose the commencement period of the payment. If you opt for an immediate annuity, then the payment will begin immediately after you have paid the premium.. However, if you go in for a deferred annuity, the payment will begin after a lapse of few years. So depending upon your age, you can choose between immediate and deferred annuity. A retired person may find immediate annuity a better option, as it will immediately start the flow of funds; whereas deferred annuity might prove a better option for a young working man.

One can also choose between fixed and variable annuity. For instance, if you are a cautious investor, then a fixed annuity, which provides a set income, might be a favorable option. However, if you are interested in earning potentially high interest rate and are comfortable with varying returns; then equity-indexed annuities can be a better choice.

The main advantage of a retirement annuity is that it provides the investor with the option of tax deference. Tax deference implies that the tax is payable only when you start receiving payments from your annuity policy. Since retirement will automatically set you in a lower tax bracket which allows you to save on taxes.

Retirement annuity is for investors who are looking forward to earn a good income and safety of their principal amount.