Income Streams and Annuities

Income streams and annuities are two concepts of basically the same color. In the world of investment and resource management, an income stream refers to the continuous inflow of finances. This inflow of money is also known through its more technical name, “annuity”.

However, the two concepts have some differences in their meaning and usage. Income streams are usually those that you receive from your employer. Annuities, on the other hand, are income streams that you purchase or acquire from an insurance company. Annuities come in different arrangement packages, giving you options from which you could pick the ones that suit your needs best.

You can actually opt for a lump sum distribution, or a regular payment scheme (income stream). However, whereas one can get your money either way, the main factor differentiating the two options is time. Money at hand, that is, “present money”, is always of greater value than money to be acquired, or “future money”. Between “now” and “then” (the time when you finally get your “future money”), a lot of changes may have transpired, causing changes in the value of your money. There is no “better” option, because determining which of these two options is best for you requires that you consider your situation and other factors involved in your investment. The appropriate option depends on a case to case basis. Lump sum distribution usually requires careful and proper management.

Determining how much you would need upon retirement would help you determine how much to invest, and what investment option to use.