Top 3 Reasons to Choose an Annuity
What is an Annuity?
An annuity is an insurance product that is used as an investment strategy by allowing the insurance company to use your money as they grow these funds. When the annuity is “annuitized”, the funds are paid back to the individual as income for a period of time, or for life. Annuities can be categorized as either Fixed, or Variable. A Fixed Annuity contains a growth guarantee that allows you to invest with virtually no risk. A Variable Annuity is more risky, and are considered as investments, and are regulated by the SEC. These function almost the same a mutual funds, and the fees for these typically are high. Because of this, Fixed Annuities tend to be more popular.
Not every annuity is the same, and there are options out there that can work for you.
Why Would I Choose an Annuity?
There are 3 top reasons why people choose to use annuities.
- Reason number one, is that annuities are tax deferred. Monies put toward an annuity are not taxed as income. With a Deferred Annuity, an individual chooses to add to the annuity fund until they annuitize. During this period, the money grows, and any money put into this account is not taxable. Every dollar that is not paid to the IRS is now earning money. This is of huge value to those who are still working and may be in a higher tax bracket at this time in their lives.
- Reason number two, is that some annuities are extremely safe. If you have a Fixed-Indexed Annuity as part of your portfolio, you have guarantees that ensure that you will not lose your money to bad 3rd-party decision making. Your money can grow at a predictable rate, and you can sleep at night knowing that you are not going to wake up to find that your assets have diminished.
- The third big reason why people choose an annuity, is to generate income. Depending on if you choose a deferred or immediate annuity, you will receive payments from the annuity either immediately (within a year) or at a later time. Depending on the annuity, you can receive income for life. This means that the payments will never stop coming. This can be used to retire as you increase your monthly cash flow. Retirees live on fixed incomes, and these budgets are usually tight. Having a steady stream of income allows them the flexibility to live without pinching as many pennies.
How do I get started?
Everyone should at least look at their options when it comes to annuities. If any of these top 3 reasons to choose an annuity appeal to you; speak to a professional who has the proper experience to help you. Remember, not every annuity is the one you want, but there is something for almost everyone. Be sure to ask yourself: “What are my retirement goals? How much money can I live on when I stop working? How long will my savings last me? How much retirement income do/will I need? Am I prepared for the unexpected?”
As you find the answer to these questions, talk to a professional, and get started on the path to enjoying these benefits of annuities.