Why Should I Buy An Annuity?

The idea of a secure lifetime appeals to most people because people like to think that at some point in their lives, they would be able to live the life of the well-lived. Still, because of the life-expectancy of most people today, it has become an enigma for many to consider an investment in fear that they would outlive the investment and simultaneously the financially sound lifestyle that they have planned for themselves. Evaluation and truly understanding the definition and characteristics of this kind of investment is critical and may play a very big part of one’s life, and would definitely be accustomed to questions, speculations and long-term controversies. But the answer to the million-dollar question, “Why should I buy an annuity?” could firmly be answered if only one would dig deeper and find out his or her needs and wants for life.

With recent, major market declines, investors have generally suffered and thought that the return of their money is more important than the return on their money. Annuities offer a range of different options in the form of payouts and riders that an investor could choose from that may better fit his or her lifestyle, future plans, long -term goals, and risk-tolerance among other factors.

Always plan your investments according to your needs.  There is nothing worse than an unneeded investment that over time could cost you your principal. So much for your well-lived, financially sound retirement! Plan how you want to spend your life, your retirement, and the money you would get from your investments.  Understand the difference between safer investments and riskier investments. If you cannot possibly think of a reason why you should make the investment then do additional research. Do not invest because it is the first thing presented to you, because investments are best made when compared to others.

Though annuities are not the only option  for the retiree wanting to invest their retirement money, they are a viable option for many. Long-term investments like these have tax advantages that continue as people go through their retirement. This means that investors are only taxed in their interest part as it is withdrawn, consequentially meaning that the interest balance will be continuing its accumulation without concern of the tax, and is not a part of the tax calculation in Social Security income, while the annuity is deferred.

As already said, evaluate your financial situation and your state of mind; make sure that you are emotionally ready and that the investment characteristics go with your needs. Your priorities and concerns should always be considered. Annuities may be a good idea, but they do have restrictions including the ability to get at all of your funds readily. It is essential to make sure that you have other savings for things that are unexpected and immediate.

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 is based upon the claims paying ability of the underlying insurance company.