As you plan for your retirement, there are a number of ways you can invest for your future. Annuities are a type of insurance, and an annuity gives you a stream of income during your retirement years. You invest in the annuity as part of your retirement plan, and you can choose how the annuity will pay out to you in the future. You can choose to receive monthly payments, quarterly payments, payments once a year, or you can receive your entire annuity payout at one time.
Fixed Vs. Variable Annuities
A fixed annuity offers a guaranteed payout. Fixed annuities are predictable, and a great option for seniors who want a reliable, steady stream of money to supplement their income every month. You can choose a fixed annuity that begins paying out shortly after your initial investment, or you can purchase an annuity that will be deferred. A deferred annuity accumulates regular interest, while an immediate fixed annuity offers a set payment. What your payout will be is determined by the amount you invest, and the age at which you will begin collecting on your annuity.
A variable annuity does not offer a guaranteed payout, and will fluctuate based on the performance of the annuity over the years. The money you place into a variable annuity is tax-deferred at the time of your investment, and you receive income based on the success of the investments you choose when you purchase the annuity.
Added Income Deferment Through Annuity Purchasing
When you invest in an IRA or 401k, there are limits to the amount of tax-deferred income you can put into the IRA or 401k every year. With an annuity, there is not a limit to the amount you can place into the annuity, yet the money remains tax-deferred until you begin receiving payouts. If you are getting closer to retirement age and you are getting worried that you do not have enough money invested for your retirement, purchasing an annuity can give you the money you need in your retirement account, boosting your overall investment for your future.
Annuities are an excellent way to invest in your retirement, but it's important to remember that there are fees associated with buying an annuity that will cut into your profit margin. Sold by insurance agents, your annuity commission fee paid can be as much as ten percent of the purchase price. In addition, if you need to take the money out for any reason, you will end up paying significant fees to access your money early.
Share8 February 2016
I still remember the day that my wife and I bought our first home. We were excited about filling the place with new furniture and looking for great area rugs. Unfortunately, before we knew it, we found ourselves deeply in debt. It was difficult to dig our way out, but over the course of the next several years, we were able to make things right. I want to teach other people how to manage finances so that they can avoid the turmoil that we went through. Financial planning might seem impossible, but with a little practice, I know it can become second-nature.