Annuities Can provide Guaranteed Income
In today’s market, many face the fear of outliving their money during retirement. Guaranteed income holds as much as appeal as a well-lived life. A guaranteed stream of income can bring peace of mind, and a sense of security. Not all investments guarantee income, and not all contracts provide a guarantee, however, there are important differences that should be kept in mind for those who need guaranteed income for life.
There are many retirees that prefer income that is guaranteed. Some people want nothing to do with investment vehicles that carry risk. Annuities offer the ability to be set up with payments guaranteed similar to that of a “pension” style payment.
Protection against outliving your assets is what most middle-class families want to be assured of. The guarantee of payments that would last a lifetime exists even if the annuitant lives to be more than what he is expected to live. This generates a sense of security and calmness that could help a family forever. The main function of this kind of investment is to provide a steady stream of income for a period or for a lifetime. This guarantee is backed by the provider’s financial strength, so an investment provided by a company is only as sound as the status of the company. This is one factor an investor must consider.
A guaranteed Annuity is an investment that guarantees that an insured party will receive payments for a certain period of time. If the annuitant outlives the designated time span, payments will be continued to be made to the annuitant. The most important advantage of this type of investment is that you do not need to worry about how your money is invested, with a guaranteed stream of lifetime income; a market loss would not affect your payments going forward. There is no need to worry about this unexpectedly ending one day, leaving you with nothing. The disadvantage of this investment however, is that it is particularly non-flexible. All investments like these are irrevocable, which means that you cannot change your arrangement as you like, and a fixed investment means you will never get more than what has been decided. This makes no space for change should your lifestyle or way of life change in the future.
As with all other investment plans, purchasing guaranteed investments takes some time to understand. One thing to remember is not to rely entirely on one investment to suffice as the only source of income. Combining guaranteed annuity payments with other sources of income, like social security and pension payments, can greatly help a retiree’s income situation.
Consult your expert trusted advisor on which guaranteed income annuity might fit the best in your financial plan.
Annuities are best suited for long term investors. Any withdrawal prior to age 59 ½ is subject to a 10% tax penalty as well as regular income tax. 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 are based upon the claims paying ability of the underlying insurance company.