Retirement and income are by far two of the most used ways to plan for annuities. Many see it as an insurance investment with the option to receive income as agreed upon. Since everyone’s scenarios are different, the accumulation and payout phase will vary. Be sure to discuss the potential risks such as surrender charges, penalties or taxes as well as benefits for each annuity. Your insurer can also go over with you what your investment goals are, and refer you to an annuity that best suits you. There are three common types of annuities to choose from as seen below.
Multi-Year Guaranteed Annuities (MYGA’s)
A multi-year guaranteed annuity relies on a fixed interest rate for a period of time meaning the premium rate will match with the period selected. Also known as tax-deferral benefit, your money does not become lost within any stock or market means. You have the flexibility to withdraw the income once the period is over or skip until the next periodic payment.
Fixed Indexed Annuity
Fixed indexed annuities are one of the most used types of annuities with no upfront charges. It has a minimum interest rate and offers fixed periodic payments. You may be familiar with the term S&P 500 stock market which works similar to it as far as the return income based on the market’s completion report. This ensures you are not losing when the market decreases, and winning when it increases. The fixed payments can be carried out for the rest of your life or towards the person accounted for in your death beneficiary plan.
Single Premium Immediate Annuity
Single Premium Immediate Annuity uses a lump sum towards lifetime and periodic times so that your payout rate is faster and larger. Do consider when choosing this type of annuity, you cannot undo the policy. You can, however, choose to receive the income as soon as thirty days or defer up to a year. Monthly, quarterly, semiannually or annually are the options offered. This policy works well for those with a fixed income on top of social security benefits.
Annuities are ideal for those who have maxed out their input into their 401K or IRA account. They also work well for those who are unsure of not having a secure financial retirement plan with an income you are comfortable working with. An insurer can work with you on comparing each contract.
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