The process of planning for your retirement can seem like a stressful and overwhelming task. This can be particularly true for those with a limited understanding about financial topics. To help you be better prepared to make smart choices about this essential topic, you may benefit from having the following questions about annuities answered so that you can be better able to make informed choices about incorporating this into your retirement plan.
What Is The Purpose Of An Annuity?
It is an unfortunate fact of life that some individuals will have the misfortune of running out of money during their retirement. When this occurs, they can lose their independence by being forced to move in with family or they may find themselves without a home. Annuities are designed to help minimize these risks by guaranteeing at least a limited stream of income.
What Determines How Much Income The Annuity Provides?
There are a number of factors that will influence the return of an annuity. For example, if you opt for an annuity that invests in a portfolio of stocks and bonds, the return may be very different from what you would receive from an annuity that guarantees a fixed return. In addition to the type of annuity that you choose, the size of your initial investment will also play a major role in determining your annual return. Each issuer of annuities can have their own policies and rules governing the returns on these policies. As a result, you will want to speak with several providers before you make your final choice to give yourself a chance to find a provider that can meet your exact needs.
How Will The Taxes On This Income Be Handled?
Some individuals may be concerned about the tax obligations that can be incurred by annuities. However, you should be relieved to learn that the benefits from these policies have a tax deferment associated with them. This will allow you to have the tax obligation for the annuity paid by your estate, life insurance policy or the balance of the annuity account.
Choosing to invest in an annuity can be an excellent way of ensuring that you have a basic income throughout your retirement. However, if you have limited financial experience or knowledge, it can be difficult to decide if an annuity will be a wise choice. Knowing the purpose of annuities, the factors that influence their returns and the tax implications of these policies will help you to be better prepared to make the right choice for your retirement planning needs.
Share19 July 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.