Annuities for Retirement
Annuities as an Investment
For some people, retirement is a scary part of life because it is the time when you no longer can do most of the things that you used to. It’s easy to think that way for the reason that people normally retire due to old age. On the other hand, there are ways to enjoy one’s retirement years.
An annuity is a contract with a bank, insurance company or other fianancial institution whereby a lump-sum payment is made with the promise that in the future the investor will receive a higher sum through a series of payments of lump sum payment. The choice to receive a series of payments is called annuitizing. Annuities are offered by banks and insurance companies to help retirees make most of their lives. If you aren’t familiar with the pros and cons of an annuity or if you are planning to purchase one, it’s time to get familiar with it. This can help you determine how you can get a financial plan that fits your needs.
What are Annuities?
The best way to describe annuity is by looking at it as a financial product. It is often sold by financial firms so annuity plan holders can invest their money and later on reap the series of payments once their surrender period expires. People invest in annuity plans to have secure resources during their retirement years. Most pensioners start to receive payments as soon as they have completed their terms and have reached at least 59 years and six months of age.
Annuities as an Investment
There are individuals who use annuities as their investments, especially if these financial products are all they can afford to put their money into. Realistically, not all people are able to save money that they can spend for their future, thus, some believe that getting annuity plans help them have more secured lives when they can no longer work. This can be true, particularly for people who are not covered by traditional retirement income sources such as Social Security. It is almost like looking back into the story of the Ant and the Grasshopper, where the ant, despite being small and feeble, tried to save as much food as he can during summer. Oppositely, the grasshopper sang all day during the summer, so he didn’t have food during the winter.
Pros and Cons of Annuities
Every type of investment has its pros and cons. Before getting an annuity plan, it is best to look at its ins and outs. This will help you determine whether you should get one or what types of plans you can choose from. There is a lot of debate about annuities, but it’s good to learn about them as early as possible because in the end, you will be the one to decide how you would like to fulfill your retirement needs.
There are many good things about annuities. One of the things that you will notice is there are lots of financial companies offering annuity plans. This gives you an opportunity to choose well, instead of being trapped into one or two choices. Annuities allow people to have stress-free and more stable lives as they retire, which is considered priceless. There are companies that offer flexible payout periods, depending on the preferences or the needs of their clients.
Some people are not in favor of investing money in financial products like annuity plans. Among the reasons are the limitations of the benefits that they will get and the taxes that may come along with the withdrawals. Although there are companies that offer flexibility with the plans that they offer, investors may still face risks. Some of the risks that they may face are not being able to get the money that they have invested, outliving their investments stated on their contracts and leaving their loved ones with nothing, in case the plan holder dies or breaches the contract for some reason. There are lots of things that need to be considered and loopholes to be studied that sometimes make people reluctant to invest in annuities.
Things to Consider When Investing in Annuities
If you believe that you won’t outlive your money when you invest in an annuity plan, it could be a great option for you. Alternatively, if you are worried about the financial security of your dependents after you pass away, you may want to look into other financial products that would complement you better. Since there are companies that allow plan holders to make adjustments to their contracts, you may also consider looking at their offers to see if they can meet your needs.
You also have to consider how much you can invest at the moment. Of course, you have present needs that you need to fulfill in order to live properly. Plan carefully and not hastily, in order to come up with the best decision. Take time to do research so you can check what options are offered in the market today. You may also talk to people who are enrolled into annuities to get tips from them. Their experiences can help you avoid common mistakes that some people commit and give you insights on what you can do when you choose your own plan.
It can be complicated to understand everything about annuities for retirement, especially if it’s your first time to hear about it. If you are confused whether or not you should get one even after asking people or doing your research, you can consult a financial adviser to help you create a solid plan for your future. Equally, you need to ensure that you work with an honest and trustworthy financial expert to be able to come up with a good plan.
Hiring a Financial Expert
It is best to only work with a licensed financial professional. This will prevent you from being exposed to risks such as frauds and other common issues faced by people today. A licensed financial expert can also give you a better view on annuity contracts, the limitations of annuity plans, benefits and other terms which may be difficult to explain on your own. You would know if you are working with the right financial adviser by seeing his sincerity and by checking his background, as well as the feedback given to him by his other clients.