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What are Annuities?
Donald Patterson is a young computer programmer in Chicago, Illinois, who takes home a nice pay check. Of late Donald had been thinking about making investments that would secure his retirement years, and perhaps allow him to retire early. After finding the best quotes on ‘ChicagoQuote’ and discussions with the financial expert, Donald finally made an investment in an annuity, a financial product that promises to help him maintain the kind of life he is accustomed to even after he retires. In fact Donald thinks with the investment he has made he may actually be able to retire earlier than he expected!
Annuities are basically contracts that insurance companies offer, wherein you make a single or multiple payments today and the insurance company assures you income in the future. They allow you to invest in your future in order to ensure that when it is time for you to retire you are financially secure and are able to live comfortably.
Types of Annuities
There are many different types of annuities to cater to the varying needs of people. Some of these include the following:
Fixed Annuities: In a fixed annuity the investor is assured the principal amount and a fixed rate of return on his investment. This is a good option for low risk investors
Deferred Annuities: These annuities allow the investor to defer the income payments from the investment until they are ready to receive them.
Immediate Annuities: A good option for investors who have a bulk amount of money to invest and wish to begin receiving income from their investment immediately.
Lifetime Annuities: These provide lifetime income to the investor after the annuity matures.
Equity-indexed Annuities: These annuities offer a basic rate of interest and also let the investor benefit from the good performance of the stock market.
Why Invest in Annuities?
Annuities have been around for a very long time now, and in fact they can also be traced back to the Roman Empire, where citizens could make a one time payment and receive a stipend for the rest of their retired lives. Here are some great reasons why you should invest in annuities:
Annuities provide you a chance to create a personal pension plan that can help you secure the financial future of your golden years and make them relatively stress free.
Life expectancy has increased tremendously over the last few decades and while this is great news, it also means that you need to ensure that your savings last along as you do.
The range of annuities on offer today allows you to select an annuity that best suits your needs. So whether it is a person just starting his career or someone who is close to retirement and has a lump sum to invest, annuities are for everyone.
Annuities are tax deferred. This basically means that your investment is taxed only when you are ready to receive income from it or make a withdrawal. Also at that time the money received is taxed as ordinary income.
Annuities are a far better choice than traditional investments such as CDs and provide a better return on the investment. With rising inflation you need to ensure that your savings work as hard as you do and investment in annuities assures just that.
There are many insurance companies that offer annuities and it is advisable to receive and compare quotes before you make a decision.
