The wise old saying— ‘Save for a rainy day’ goes well with annuities. Investing in annuities is all about preparing for the sunset of your lives well in advance. Annuities are the long-term, interest-paying contracts with the insurance companies or financial institutions.
Annuities assure you return of a premium or regular premiums for making a series of income payments. Annuities are most often purchased for future retirement income. Aren’t they like saving for a rainy day in the dusk of your life? Certainly, annuities can fetch and guarantee the income that lasts as long as you live.
So, annuities are the best friends of retirees. They help them live happy and independent lives in their retirement phase of life. You must plan your retirement in the peak of your life. Without wise planning, your retirement may become the woeful phase of your life.
Annuities provide you the best shield against the miseries of you retirement phase. There are basically four common types of annuities; fixed annuities, fixed index annuities, immediate annuities, and variable annuities.
Fixed annuities: These annuities pay fixed rate of returns for a period of time.
The following are the key benefits of fixed annuities:
As interest rates increase, you are rewarded with a higher credited interest rate. |
These annuities are guaranteed, so need not worry about losing your money. |
Longer the terms the higher will be your benefits |
The credited interest is tax-deferred as long as the money stays in the fixed annuities or another tax-deferred vehicle. |
You don't have to annuitize the annuity to remove your money. |
You earn interest on interest, interest on deferred taxes, and interest on the original premium, so called triple compounding. |
The key disadvantages of fixed annuities are:
Surrender charges for removal of funds beFor the term of the annuity is mature |
There are tax penalties if you spend any of the money beFor age 59 1/2 like most qualified retirement programs.
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When interest rates go down, generally credited interest rates go down. |
Fixed index annuities: formerly known as equity indexed annuity, the fixed index annuities are the fixed annuities with the potential to return more credited interest if the index employed does well over the crediting period. In fixed index annuities you can't lose your money if the chosen index goes down. It means that you participate in the upside, but you do not participate in the downside. The basic advantages of fixed index annuities are the same as fixed annuities, only with the additional potential for an upside return compared to the fixed interest rate return of a fixed annuity.
Immediate annuities: These are the annuities where you pay your money to insurance companies and the companies start paying you immediately. Immediate annuities are useful for some purposes, but aren't commonly used for a regular income stream because these have generally lower interest crediting rates.
Variable annuities: These annuities are absolutely different from the fixed annuities, fixed index annuities, or immediate annuities. In variable annuities you divide your premiums into investment accounts such as mutual funds and stocks. You money is invested instead of saved. Thus your money is at risk. The other three basic types of annuities guarantee to protect all (fixed) or a majority (fixed index annuities) of your premium and your minimum credited interest, but you can lose your money in variable annuities.
For more info on annuities, click here or call an Annuity Specialist at AnnuityForLife.com, 1-888-261-6237
