Annuities Reviews

An annuity is a way to protect someone that may outlive their savings. In essence, it will assure that the investor will maintain a principle amount of savings that can be liquidated and dispersed over a set number of years. Annuity FYI includes the fact that there are a number of choices available when one is considering this option. In general, annuities are interest bearing savings accounts that are tax deferred until withdrawn.

They also guarantee income over a period of time, similar to life insurance. The difference being that life insurance protects your family in the event that the investor dies too soon, whereas an annuity protects the investor in the event that he or she out lives their retirement.

Annuities can be purchased from various institutions including banks, stockholders, insurance and mutual funds companies. More annuity FYI adds that they are further divided into immediate and deferred annuities. An immediate version usually requires a large initial investment and then begins payouts immediately. Deferred annuities are the more common version and are used as tax deferred options to save for retirement.

To further break these down, deferred annuities can be fixed or variable. A fixed annuity allows one to lock in an interest rate for one to five years, while a variable annuity has an adjusting interest rate. A fixed annuity reminds one of a CD with a slightly better return, while variable annuities allow investments in stock, bonds and money market funds. Because the risk is somewhat higher in variable annuities, the return can be greater.

Regardless of the type of annuity that one purchases, the initial investment is taxed as income but then the annuity is allowed to grow untaxed until it is withdrawn. More annuity FYI encompasses the flexibility of the payouts. There is the option of lump sum payouts, payouts of certain amounts over a set time, or used as steady income to cover the extent of ones life. Whatever payment calculator is used, the investor is guaranteed to receive at least the initial investment back.

Because of the cost associated with annuities, they are meant for long term investing. One must pay insurance, death benefit and management fees to maintain an annuity. In addition, other annuity FYI is that there are fees associated with early withdrawal that are in addition to what the government requires. It is estimated that one must be able to leave the money in an annuity for at least eighteen years to see the benefit and profit.