With retirement around the corner, many people think about investing in an annuity, as a retirement strategy. But is getting an annuity the right choice for seniors? Whether we like it or not, the world of finances is governed by very practical and materialistic principles, which means that insurance companies would not sell anyone annuities if they did not know they could make a profit out of this. The following explanation will help you understand better whether you should buy an annuity or not.
Annuity Payment
First of all, what is an annuity?
According to the definitions offered by financial experts, annuity is an insurance product whose main role is to pay an income to those purchasing one. Seniors are seldom targeted, because they have an important fund at their disposal - their retirement fund - and they can invest part of it in an annuity.
As annuity payments offer a source of income for retirees later in life, an annuity is often considered a good investment. But is the grass as green as they say?
Annuity Products
How does it work?
In order to receive annuity payments, you first need to invest. As the old saying goes, you need to spend money to make money. In the first stage, you will buy an annuity, and therefore you will invest in it an important sum of money. After a certain duration, you will start receiving income annuity for the money you have invested. The money can be paid to you monthly, annually, or you can receive a lump sum as an annuity payout.
How much money you will get depends a lot on the duration of your payment period; the longer the time you want to receive fixed regular or variable income, the smaller the amount of cash you get each time will be.
Annuity
Options
Many consider annuity as a means for completing their income in their later years. You can decide to receive annuity payments for a certain number of years, or for the remainder of your days. Also, there is an option for last survivor annuity, which refers to the possibility that your spouse will receive the remaining benefits after your death.
A guaranteed income is provided by fixed annuity contracts, but you can also opt for a variable annuity, keeping in mind that the income stream will be affected by market performance.
Annuity Income
Is it a good deal or not?
An annuity can be a great investment tool and a strategy for carefree retirement. However, annuities are also associated with very high expenses, which means that you will have to spend some money in order to receive decent annuity payments later on. Some may consider that paying so much in the present for receiving a benefit in the future is not such a good deal.
Annuity Cash
It actually all depends on what kind of annuity deal you get. Before jumping head first to buy an annuity, you should consider the various offers on the market. Aim for a deal that you can pay as little as possible for, while providing you with the most convenient payouts afterwards.
Susan is a full-time author and consultant, leading a select team of expert writers and editors, providing online and offline content to an exclusive clientele from around the globe. She is an avid traveler and reader and enjoys writing on health & fitness, travel, parenting, relationships and personal development.
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