What are annuities and how can it help with my retirement?
It can be difficult to feel confident in your retirement plan these days. Pensions from companies are few and far between, Social Security concerns leave you with even more questions, and yet life expectancies are longer than ever before. With all these concerns, have you considered annuities?
Annuities are a form of insurance that pays out a steady income stream and is commonly used as part of a retirement strategy plan. These income streams can be received monthly, quarterly, annually, or in a one-time payout.
When you invest in an annuity, it will make payments to you on a future date or several future dates depending on the plan you select. The amount of those payouts also depends on the type of annuity plan you select.
It can be difficult to feel confident in your retirement plan these days. Pensions from companies are few and far between, Social Security concerns leave you with even more questions, and yet life expectancies are longer than ever before. With all these concerns, have you considered annuities?
Annuities are a form of insurance that pays out a steady income stream and is commonly used as part of a retirement strategy plan. These income streams can be received monthly, quarterly, annually, or in a one-time payout.
When you invest in an annuity, it will make payments to you on a future date or several future dates depending on the plan you select. The amount of those payouts also depends on the type of annuity plan you select.
There are two basic types of annuities: deferred and immediate.
As the name suggests, a deferred annuity allows you to receive payouts at a later date. Your money is invested for a time until you're ready to start receiving payouts. In most cases, this is during retirement. If you still have awhile until you are ready to begin retirement, this may be the best fit for you.
If you're rapidly approaching the retirement age, an immediate annuity probably makes the most sense. With this type of annuity, you start receiving payments soon after you make your first investment. It's important to note that a deferred annuity can be converted to an immediate when you want to start payouts.
Whether you are looking into deferred or immediate, annuities can be either fixed or variable or a hybrid of the two.
What is the difference between fixed and variable annuities?
Fixed annuities pay guaranteed rates of interest. The dependability of a set payout makes a fixed annuity a popular option for those who want a known income stream as part of their retirement strategy. They also have low investment minimums, so they can fit within a variety of budgets.
A variable annuity is a retirement tool that allows you to choose from a variety of investments. The payout is then determined by the performance of the investments you chose. This type of annuity gives you the change for long-term growth potential.
Whether you choose deferred or immediate, fixed or variable, there are some tax benefits in annuities. Your money grows tax-deferred meaning that your annuity investment money is not taxed, but your earnings will be once you start making withdrawals.
Are annuities right for you? Let us help.
Annuities are sometimes known for their high expenses but they can be a useful retirement strategy tool. To find out if annuities are the right fit for your retirement plan, let Topo Financial walk you through the benefits and tradeoffs of this type of investment.