Retirement Planning with Fixed Annuities
Are Annuities Good For Providing Retirement Income?
Annuity products come from major life insurance companies. They are a mix of investment and insurance, but are mostly considered when a person wants to build some cash for a long term goal, or to provide a monthly payment. Lots of people think about retirement when they consider these products, but some consider them for other savings goals.
So how does the cash account get funded? An annuity will need to have a cash value in order to generate growth or income.
Immediate Annuities accept a lump sum. This money usually comes from a distribution a person gets at retirement, but it could come from other sources too. After being approved and funded, the product starts generating periodic payments right away.
A deferred annuity, on the other hand, must be kept intact for a period of time that is agreed to when it is applied for. If money is withdrawn before this, except for specified reasons, the owner must pay a penalty. So these are meant to reach longer term goals, and for people who do not need the money right away. They could be funded with a lump sum or with a series of payments made over a period of years.
Payouts - You can also find a variety of payout options. Some common examples are lifetime, joint survivorship, or 10 years. Their are many combinations of this too. For instance, some may have a lifetime payout with a guaranteed payout of ten years. That means that a beneficiary would collect income if the owner passes away before a decade ends.
If you are not sure that you will need the income, consider a flexible payout option. You can use this account to put aside money that could be used for an emergency if needed, or can be left to heirs if not needed.
One big advantage of buiding cash this way is favorable tax treatment. Both gains and compouding are free to go without being taxed. Income may or may not be taxed depending upon the qualified or non-qualified tax status of the contract.
Another advantage is the safety of fixed products. Fixed products may pay at a contract rate, or they may be pegged to a market index.
Consider one common market like the S&P 500. In good years, when the index goes up, the cash account will grow at a rate that is pegged to that market index. In down years, when the index is down, the cash account will be guaranteed not to lose money. It may either be set to remain stable, or even to earn a set rate like 2%.
Of course, most people want to know how long their annuity will pay out, and how much money they will get. This will depend upon how much money is in the fund, the rate of return, and the type of annuity. It is important to be able to compare different annuity products on the market, and see how they will help you reach your goals. - 23310
Annuity products come from major life insurance companies. They are a mix of investment and insurance, but are mostly considered when a person wants to build some cash for a long term goal, or to provide a monthly payment. Lots of people think about retirement when they consider these products, but some consider them for other savings goals.
So how does the cash account get funded? An annuity will need to have a cash value in order to generate growth or income.
Immediate Annuities accept a lump sum. This money usually comes from a distribution a person gets at retirement, but it could come from other sources too. After being approved and funded, the product starts generating periodic payments right away.
A deferred annuity, on the other hand, must be kept intact for a period of time that is agreed to when it is applied for. If money is withdrawn before this, except for specified reasons, the owner must pay a penalty. So these are meant to reach longer term goals, and for people who do not need the money right away. They could be funded with a lump sum or with a series of payments made over a period of years.
Payouts - You can also find a variety of payout options. Some common examples are lifetime, joint survivorship, or 10 years. Their are many combinations of this too. For instance, some may have a lifetime payout with a guaranteed payout of ten years. That means that a beneficiary would collect income if the owner passes away before a decade ends.
If you are not sure that you will need the income, consider a flexible payout option. You can use this account to put aside money that could be used for an emergency if needed, or can be left to heirs if not needed.
One big advantage of buiding cash this way is favorable tax treatment. Both gains and compouding are free to go without being taxed. Income may or may not be taxed depending upon the qualified or non-qualified tax status of the contract.
Another advantage is the safety of fixed products. Fixed products may pay at a contract rate, or they may be pegged to a market index.
Consider one common market like the S&P 500. In good years, when the index goes up, the cash account will grow at a rate that is pegged to that market index. In down years, when the index is down, the cash account will be guaranteed not to lose money. It may either be set to remain stable, or even to earn a set rate like 2%.
Of course, most people want to know how long their annuity will pay out, and how much money they will get. This will depend upon how much money is in the fund, the rate of return, and the type of annuity. It is important to be able to compare different annuity products on the market, and see how they will help you reach your goals. - 23310
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posted by Mr. Forex at
10:53 AM
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