Advantages and benefits of owning an Annuity

Have you ever wondered what your future holds when you are grey and old? Do you ever feel uncertain of your future finances as you reach retirement?   Unless you’ve been blessed with great financial success, there is a good chance this thought has crossed your mind. There are many important financial tools available that can help an individual throughout their retirement years, one of them being the annuity.

An annuity offers many advantages and benefits. It’s even more comprehensive now than ever before. Here are some of the benefits that you need to know.

First, annuities are tax deferred vehicles. Taxes aren’t paid until income from the annuity is received.  Annuity payments usually consist of a taxable amount and a “non” taxable amount.  When planning for retirement, the tax benefits of an annuity can greatly affect the overall performance of a good financial plan.*

Second, there are several payment options that you can choose from depending on your needs and lifestyle. Payments can be made in periodic distributions for life, or for a certain period. **

Third, annuities also supplement other retirement income such as social security benefits, pension plans, bonds, etc.

Fourth, there are no contribution limits in setting up this investment plan. Therefore, you can invest as much as you choose in annuities, provided it is within the ceiling amount set by the insurer.  Many other retirement vehicles carry maximum annual contribution limits; annuities typically do not carry these limits.

*Any withdrawals from an annuity before age 59 ½ are subject to a 10% tax penalty as well as regular income tax.

**It is important to note that any payment agreed upon when investor chooses to convert their contract is a set amount for the period of payouts stated in the contract.  Unless otherwise stated in the contract, these amounts do not usually have a stipulation that they grow along with inflation, meaning the value of money received could potentially decrease over time.

Annuities are best suited for long term investors. Annuities often also have a surrender schedule, meaning that withdrawals may be subject to a penalty by the insurance company if not left in for a predetermined amount of time.  Any guarantees on principal invested is based upon the claims paying ability of the underlying insurance company.