Annuities

People buy annuities to create long-term income. While most often considered financial solutions for older people who are close to retirement, annuities can benefit investors of any age with a variety of financial goals.

An annuity contract is a legally binding, written agreement between you and the insurance company that issues the contract. This contract transfers your longevity risk — the risk of you outliving your savings — to the insurance company. In exchange, you pay premiums as outlined in the contract.

Annuities come in two basic configurations: immediate or deferred.

The option you select will depend on your financial goals. If you want to begin receiving annuity payments right away, you will choose an immediate annuity.

Alternately, if you would like to set your payments to begin at some point in the future, you will purchase a deferred annuity and specify the start date in your contract.

Different types of annuities exist to fit the diverse needs of the market. Your personal goals and objectives will determine the type of annuity that is right for you.

One of the key benefits of an annuity is that it allows the investor to save money without paying taxes on the interest until a later date. Annuities have no contribution limits, unlike 401(k)s and IRAs.

Another significant benefit of annuities is the creation of a predictable income stream to fund retirement. With an annuity, you don’t have to worry about outliving your savings. This is a major advantage in the post-pension age.

Your reasons for investing in an annuity should align with your unique lifestyle and financial situation.

Reduce Your Opportunity Cost

For many investors, the main objection to annuities is the risk of losing access to their money for the length of their contract. This means that in addition to the possibility that you won’t be able to cover unexpected expenses, you may miss the opportunity to take advantage of higher interest rates or to invest in the stock market.

This is where your understanding of your long-term goals comes in. Your decision to purchase — or sell — an annuity should be in alignment with your goals, and you should be comfortable with having your money locked down for a modest payout in exchange for guaranteed lifetime income.

To reduce your opportunity cost, consider a partial investment upfront. This will allow you to reserve some of your savings for unplanned expenses and give you the ability to capitalize on a potential rise in interest rates.

Getting started is as easy as contacting us now. We’ll put you in touch with our partner, Senior Market Sales, for more information on securing your financial future.