What are Fixed Annuities?
Many people have asked me to explain fixed annuities. They want to understand how these products, with features of both investments and insurance, will help them plan for their retirement. First all all, they are actually sold by life insurance companies, but not for the same reason that term or whole life products are sold.
Are They Insurance?
A life insurance contract is purchased to protect heirs in case of a death. An annuity product, on the other hand, is purchased to actually protect the owner’s income while they are alive (though there may be death benefits in the contract). People use these as tools to save for a longer term goal, or to provide income for the future.
Immediate Vs. Deferred
If a lump sum is used to purchase the contract, and it begins to make payouts right away, that is called immediate. If, instead, the contract is purchased over a period of years or some years in advance, that is called deferred. A retiree with a large sum of cash may purchase an immediate contract so he or she can begin getting income. People planning for retirement in the future, may either contribute a sum of cash, or make periodic payments, in order get payouts some time in the future.
Why Choose Annuities for Retirement Planning?
These products can have several advantages, which include tax deferred growth, higher returns than savings accounts, and guaranteed minimum returns. That is what makes them attractive. You would have to explore various options to find the product that will work the best for you.
What to be Careful of when Buying Annuities
Only put aside money that you can spare. Many contracts will have penalties for early cashouts, unless it is for a reason (i.e. nursing home confinement) that is already spelled out in the contract.
Find the Right Product For You!
The world of retirement planning does not have to be confusing. You can use our simple online forms to provide you with free online annuity quotes that are based upon your own assets and goals.
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