Why Annuities Are Good Investments for Retirement?
Annuities are investment vehicles designed to serve as a reliable income source to supplement your retirement savings. They come in different forms and function in different ways. However, there are some things to keep in mind before purchasing an annuity.
What Are Annuities?
An annuity is an insurance product that you can purchase from an insurance company or insurance broker. When you purchase an annuity, you are investing money in exchange for receiving routine payments at a later time.
These payments can be:
- Monthly
- Once every three months
- Once every six months
- Annually
When you buy an annuity, it’s not as if you’re paying someone to keep your own money away from you. Your funds grow with interest, so you will get more than you initially put in.
What Are the Types of Annuities?
Annuities can be categorized into:
- Life
- Variable
- Term-certain
Life annuities disburse payments for the remainder of your lifetime. You may be interested in this kind because it’s income that will always be there.
Variable annuities have two types of payments associated with them – fixed and variable. These annuities are invested into the market, and your payments will fluctuate based on market conditions. The risk is greater, but it can also pose a greater reward. The portion earned from investments is the variable component. The fixed portion is the guaranteed income (however, the amount is smaller than the other types). This is ideal if you have higher risk tolerance.
Term-certain annuities don’t last forever. They have a predetermined end. If you pass away before the payments end, those payments will be passed on to your loved ones.
What Should I Know Before Buying?
The funds you have in the annuity are locked away, meaning you only have access to the money disbursed to you – not the entirety of the account.
This is a long-term commitment. You won’t be able to switch to a different insurer, and you won’t be able to cancel your annuity unless your insurer provides a specific time during which you can cancel.
The funds you receive count as taxable income, so you will need to account for your payments when tax season arrives.
If you don’t already have life insurance, some annuity policies will allow you to name a beneficiary. This may be something to keep in mind when you decide to buy an annuity.
Are Annuities Good Investments?
Annuities are good investments because no other form of investment has a guaranteed series of payments. This is guaranteed income, which can help your peace of mind by assuring that you won’t have to survive off of retirement savings alone. They can be a perfect complement to your other retirement funds.
Retire With Peace of Mind
Annuities are among one of the many ways we at FiduSure Financial help with your retirement planning. With our help, you will get the routine payments to help you cover your personal expenses during your retirement years. Find out more by calling us today at (647) 567 4702.