While we know that annuities are great for being a provider of a lifelong income, there are still several things you should know as you plan for your financial future and retirement. In this article, we are going to go over these things, as well as some pointers as you decide whether or not an annuity is right for you.
Annuities sound like a dream to some: having income that outlives you and not having to worry about it. However, they are also far from simple. There are numerous types of annuities, and this is where misunderstanding and under-average explanation comes in. Oftentimes, annuity candidates are led to think a specific annuity is right for them, but in reality, they are influenced to purchase it because it just happens to be what a broker is advertising during that time. This is common, and some candidates are completely unaware that annuities have to be researched and shopped for, not just sold to you on a whim.
It is imperative that before you begin shopping around for an annuity contract, you understand exactly what an annuity is. An annuity serves to provide the goals and guidelines for the remainder of your lifetime, whether that includes legacy planning and/or long-term care costs when you become elderly.
You might be wondering, “how do annuities work?”
Once you buy an annuity, you are guaranteed income for as long as you live, even if you have already reached the maximum on your retirement accounts, such as a 401(k) or an IRA.
Annuities work by the owner (annuitant) transferring the risk to their insurance company. By doinig so, there is a premium to be paid, however, the format of the premium depends on which type of annuity you buy. Premiums can be paid monthly, quarterly, yearly, or even in full or lump sums.
With annuities, what is great is that they are customizable to your preference. Now, you do have to choose between the main types of annuities: deferred and immediate. Deferred annuities provide the owner with income later on in life, while immediate annuities do as they say: provide stream of income now. There are also fixed and variable annuities, which you can learn about here.
Depending on your financial preferences and the outlook you have on your financial future, annuities may be right for you, or annuities may not be right for you. There are pros and cons to buying both kinds of annuities, however, it is essential to know that you can customize your annuities to cater to your own choices and preferences.
To learn more in-depth about annuities, visit this article.
If you would like to go over potential scenarios or outcomes for your financial situation and how annuities may come into play, Wolfe Financial would be happy to speak with you. Reach out to us by phone at 301-652-9677 or email us at firstname.lastname@example.org. We are here to make annuities work for you.