Adding annuities to a retirement portfolio is often recommended as a way to provide a guaranteed and stable income. The basic concept is simple. You buy the annuity with a lump sum and in return get a fixed monthly income for the rest of your life.
People shopping for annuities quickly discover that the reality isnt as simple as the concept. The product described above is a fixed lifetime annuity but there are other options. Which one is best for retirement?
Fixed vs. Variable
Fixed annuities pay a guaranteed income every month. This amount of money is paid to you regardless of market fluctuations or other events. It is a stable investment with a safe pay off which makes it ideal for retirees.
A traditional fixed annuity doesnt increase its payments as prices change, meaning that your buying power will slowly decline over time. Look for annuities that offer cost of living protection. They cost a bit more but the payments will adjust with inflation so you can maintain your lifestyle.
Variable annuities offer payments that fluctuate with market conditions. In the long run they pay better returns, but that doesnt mean much if the income drops enough that you cant pay your bills this month. Most retirees opt for fixed products.
Lifetime vs. Term
Lifetime annuities pay every month for the rest of your life, no matter how long you live. This makes them excellent insurance against the risk of outliving your assets. There is no limit to the payout so you may end up being paid more than the money you invested.
Term annuities offer income for a specified period of time. Because the offering company can more accurately judge their liability, term products offer better monthly income than lifetime products.
There are rare cases where a retiree may know future income needs will be reduced, say when a spouses pension kicks in, so would be safe choosing a term product. However in most cases, lifetime annuities are the better retirement choice.
Other Annuity Options
Joint annuities are popular options for married couples. The payments are made to both parties so that, even if one dies, the other will continue to receive income.
Premium protection guarantees that the total value of the annuity is at least what you originally paid in. If you should pass away before you have received payments equal to the value, your heirs will continue to receive the payments until the full value has been met. The monthly payouts will be a bit lower, but the guarantee is worth it to many investors.
One of the most important features of buying an annuity is the strength of the company holding it. Invest only with highly rated providers. If the company fails, your investment fails with it.
Adding annuities to a retreat portfolio is often recommended as a way to provide a guaranteed and stable income. The basic concept is simple. You buy the annuity with a lump sum and in return get a fixed monthly income for the rest of your life.
People shopping for annuities rapidly notice that the world isnt as simple as the concept. The merchandise described above is a fixed lifetime annuity but there are other options. Which one is best for retirement?
Fixed vs. Variable
Fixed annuities pay a guaranteed income every month. This add up of money is paid to you disregardless of market fluctuations or other events. It is a horse barn investment funds with a safe pay off which makes it ideal for retirees.
A traditional fixed annuity doesnt increase its payments as prices change, import that your buying power will lento declension over time. Look for annuities that offer cost of living protection. They cost a bit more but the payments will adjust with inflation so you can defend your lifestyle.
Variable annuities offer payments that vacillate with grocery conditions. In the long run they pay better returns, but that doesnt mean much if the income drops enough that you cant pay your bills this month. Most retirees opt for fixed products.
Lifetime vs. Term
Lifetime annuities pay every month for the rest of your life, no weigh how long you live. This makes them fantabulous indemnity against the risk of outliving your assets. There is no limit to the payout so you may end up being paid more than the money you invested.
Term annuities offer income for a specified period of time. Because the offering ship’s company can more accurately judge their liability, term products offer better monthly income than lifetime products.
There are rare cases where a retiree may know future income needs will be reduced, say when a spouses pension kicks in, so would be safe choosing a term product. However in most cases, life annuities are the better retreat choice.
Other Annuity Options
Joint annuities are popular options for married couples. The payments are made to both parties so that, even if one dies, the other will continue to receive income.
Premium shelter guarantees that the total value of the annuity is at least what you to begin with paid in. If you should pass away before you have accepted payments equal to the value, your heirs will continue to obtain the payments until the full value has been met. The monthly payouts will be a bit lower, but the warrant is worth it to many investors.
One of the most important features of buying an annuity is the intensity of the company retention it. Invest only with highly rated providers. If the company fails, your investment funds fails with it.
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