Annuity Advice

Annuities are funds offered by insurance companies that, much like IRAs and 401(k)s, allow you to save for retirement. After a set amount of time, you receive your payment from your annuity, plus interest it accrued, as a fixed weekly, monthly, or yearly payment, or as a lump sum. Typically individuals who purchase annuities are preparing for retirement, or have maxed out the contributions they can make to their other investment options, such as their IRA or 401(k). Five major types of annuities are variable, fixed rate, equal index, immediate, and longevity annuities.
Variable Annuities
Variable annuities are similar to mutual funds in that they allow you to invest in a set number of stock or bond-like investments for a specified period of time. Also, you do not pay taxes on this type of annuity until you withdraw your funds. The downside to variable annuities is that you pay a penalty fee if you withdraw your money before age 59 ½, you have to pay taxes once you start withdrawing your fund, and the sales commissions for this type of annuity can be high. Also, if your investments within the annuity decrease in value, so will your annuity.
Fixed Annuities
Fixed annuities are akin to certificates of deposits (CDs) issued by banks. Their interest rate is guaranteed and you can invest a lower amount in them than in other annuities - $1,000 or more. A disadvantage is that the interest rate may fluctuate over time and not keep pace with inflation, resulting in you earning less money for your investment over the life of the annuity.
Equal Indexed Annuities
Equal indexed annuities are like a variable and fixed rate annuity in one. The advantage is that they fluctuate with the market and you are guaranteed a set amount of interest even if the market falls flat. The downside to these annuities is that they may not always match the market, their commission and fee rates can be high and they are difficult investments to understand, lending some people to be duped by the individuals selling these types of investments.
Immediate Annuities
Immediate annuities begin payouts immediately. Essentially, you put in a lump sum of money, for example, $70,000, and then you begin to receive payouts from that money, say, once a month, until you die or until your money runs out. The advantage to this system is that you have a guaranteed source of income. The disadvantage is that if you die early, your heirs will not receive the leftover money. If you die later than expected, then the money may have already run its course, leaving you to find other ways to supplement your income in your later years.
Longevity Annuities
Longevity annuities are great for those who have no intention of withdrawing their money until they are well-advanced in years. This is good because unlike other annuities, you cannot withdraw funds from a longevity annuity until you are 80 years old or older. The advantage of this type of savings plan is that you have a steady source of income once your payout begins. The disadvantage is that if you die and you still have money in your annuity, your successors will not see a dime of this income.
For more information on annuity advice, contact your insurance agent or broker. They will be able to help you wade through the vast amount of annuity literature in order to help you find the annuity you need. You can also research various companies online as well as books and finance magazines at the public library in order to become savvy on the various types of annuities available.







For more information onannuity advice, contact your insurance agent or broker. They will be able to help you wade through the vast amount of annuity literature in order to help you find the annuity you need.