Some Points to Ponder on Obtaining Annuities
Having a retirement plan is beneficial. It allows people who no longer have jobs to still receive periodic payments. Insurance companies provide this kind of service by providing a contract that allows the person to invest their money over time and receive their money back with interest at a particular time period. This type of transaction is made into contracts called annuities. Take note, this is different from life insurance. Life insurance deals with a cash benefit should the person die during the policy term. annuities involve a plan that provides a person with steady income over a designated period of time.
Different types of annuities provide the annuitant (or the client) different options on how they would want to receive their return of investments. Of course, different insurance companies offer varying plans. Many would provide a lifetime annuity where regular payment is provided to the investor until the annuitant dies. In the event of this happening, a rider can be purchased that states if the annuitant has a beneficiary, then the payment is given to the said beneficiary.
In order to obtain an annuity plan, one must find an experienced agent they feel comfortable with. The insurance company ratings should also be considered. This rating indicates the company’s relative financial strength. There are rating agencies that have certain criteria to grade insurance providers this ratings are useful to measure risks.
For a person to know how much money he can receive at a particular period, say monthly, would depend on the following variables: age of the client, gender, state of residence, the premium or the initial payment made with the chosen annuity plan, and what the insurance company offers for that particular premium and for that particular plan. There is an annuity calculator available in each company that would provide an estimate of the payment the person might receive for a given criteria and premium. Take note, once an annuity plan is bought, it is unlikely to have the payment changed. However, it may be allowed to buy more income within the chosen plan later.
Many companies require that the purchaser of an annuity be younger than 80 years old. Also, most companies do not require a medical exam. In order to know how much of the person’s asset should be delegated to buy an annuity, the person must know his cost of living or daily expenses, and should also be aware of their net worth. With this in mind, it is better to seek help from an expert or a financial planner, or an advisor that he trusts. Remember, since annuities involve a fixed income in a fixed period of time, any unexpected condition that would lead to spending a large amount of money will not be covered by the annuity. Hence, a person must know how much income he needs and the assets he owns in order to know how much he will be willing to use in purchasing the appropriate plan and still ensure that there are adequate liquid funds in place for emergencies or unexpected expenses.
Annuities may provide a financial option for someone in retirement. Proper thought and care is essential in choosing which annuity to purchase to maximize the interest earned of the investment.
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.