While there is no easy fix for a lack of inadequate savings, the only way to guarantee a lifetime income stream that cannot be outlived is through an annuity. By taking a portion of your retirement savings and purchasing an income annuity, you can ensure that you will not outlive your assets.
A recent study done by MetLife, in cooperation with Rand, found that across all net worth and total household income levels, guaranteed income streams (pensions, annuities, etc.) have a positive impact on retirement satisfaction. Those who fund more of their retirement income with guaranteed pensions versus just savings are more satisfied. This article will help you learn basic annuity information that we hope will help you decide what type is best for you.
What Is an Annuity?
An annuity is an insurance contract. An annuity contract is created when an individual gives the insurance company money which may grow tax deferred and then can be distributed back to the owner in several ways.
Every annuity has two basic properties: whether the payout is immediate or deferred, and whether the investment type is fixed or variable. An annuity with immediate payout begins payments to the investor immediately, whereas the deferred payout means that the investor will receive payments at a later date. An annuity with a fixed investment type offer a guaranteed return on investment by investing in government bonds and other low-risk securities, whereas a variable investment type means that the return on the annuity investment will depend on performance of the funds (called sub-accounts) where the money is invested. Based on these two properties with two possibilities each, there are four possible combinations, but the ones commonly seen in practice are an annuity with immediate payout and fixed investments (often known as a fixed annuity), and an annuity with deferred payout and variable investments (usually called a variable annuity).
Good news for retirees
Fortunately for the consumer, the insurance industry has realized that as our society ages, and the number of seniors skyrocket over the next 10-20 years, retirees will be looking for better ways to “deaccumulate” their retirement. The result of this is that the industry has responded with a whole new generation of products that provide the necessary lifetime guarantees while including a myriad of options to provide flexibility to the investor, and overcome the concerns that some people have to annuitization.
Among the more popular features is a product that offers a withdrawal option, permitting withdrawals during the first two years. Another option that is popular is the ability to elect to have full transfer flexibility among the variable investment and fixed investment options within the contract. This can be both useful and add peace of mind during volatile markets. It's important to know this annuity information before making the investment, so that you have the safety and liquidity that is best for you.
While no single product can offer a panacea for the wave of baby-boomers about to retire, income annuities can be an important element to true financial security.
Learn more Annuity Information with our Free Guide – “The Truth About Annuities!"
Important Facts You Must Know If You Already Own An Annuity Or You Are Considering An Investment!
For whom is an immediate annuity suitable?
• A retiree needing increased monthly income
• A person with no heirs or who is not concerned about leaving an estate
• Someone who has set aside other funds to leave to heirs if they desire to leave an inheritance
• A retiree desiring the fixed payment and wanting to avoid maturities, rolling over investments and the maintenance and administration required of investing on one’s own |
Although Annuities can be suitable for those wanting the security of having a regular and guaranteed income, it is important to have a financial plan in place that takes into account the possibility that you might outlive this specified term.
More Annuity Information:
Types of Annuities - There are fixed, variable, immediate annuities, and deferred annuities. You can buy annuities for a fixed period, or a lifetime annuitiey. There are also qualified, nonqualified annuities, single premium and flexible premium annuities. Learn what annuity is right for you! Read the full article...
Fixed Immediate Annuity Taxes - Consider the Income Taxes When You Purchase a Fixed Immediate Annuity. Fixed Immediate annuities can provide a steady income that may even surpass your natural life. But what are the tax implications to you and your beneficiaries. Read the full article...
What's the "Real" return on a fixed annuity? - Annuity interest rates can often change in tandem with the rates paid on other fixed interest investments. However, whenever rates drop, the real return on annuities could potentially be higher than other interest-paying assets. Read the full article...
How To Make the Most of Maturing Equity Indexed Annuities - If you bought it seven years ago, the maturity date may be approaching fast. And you might only have a small time-window to decide whether to renew the annuity or place your money elsewhere. Read the full article...
For more great annuity information, and other retirement income sources visit: http://www.retirement-income.net, and http://www.invest-faq.com/.
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