Immediate Annuities and Deferred Annuities Explained
Investors in the market for investments that can generate guaranteed income for retirement should have immediate annuities and deferred annuities explained by their financial planners. These are the two most popular types of annuities available today.
Immediate annuities are good products for seniors who want to receive payments at pre-specified return rates. After paying an insurer a lump-sum amount, you can receive monthly or yearly payments for the rest of your life. On the other hand, deferred annuities require that you pay the insurer for a set period, and when you reach a set amount or reach a certain length of time, you will receive regular annuity payments.
Fixed and Variable Annuities
Fixed annuities give the investor guaranteed returns over a set period. For example, a payment of $100,000 to an insurer can result in a guaranteed return of 5% of that initial payment. Retirement annuities that guarantee fixed rates are good for risk-conscious investors, as well as seniors near retirement who want to strengthen their nest eggs.
Variable annuities were created to attract investors who might otherwise be discouraged due to the comparatively low growth potential of fixed annuities. Although lower return rates are expected from these kinds of annuities, the money in variable annuities are also tied into other securities (such as mutual funds) that can generate larger returns if market conditions are favorable. If the market is poised for growth, a variable annuity can be promising, especially as your cash is not limited to generating low yields.
Advantages of Annuities
Investing in annuities gives the investor huge potential savings due to the how these products are taxed. For example, the money invested in an annuity has the ability to grow, tax-deferred, up to the point that you start taking withdrawals. There are also tax benefits upon making withdrawals from your annuity, including the fact that only the gains are taxed. In comparison to IRAs and 401Ks, there are no limits to how much you can invest in an annuity, after which you will receive guaranteed payments that can help offset the effects of turbulent markets on your investment and allow you to recover investment losses and strengthen your overall retirement funds.
If you are looking for investments that can help augment your finances while balancing out the risk in your investment portfolio, you may be able to find annuities a good fit. Prior to purchasing an annuity from an established insurance provider, have annuities explained so you can have a better understanding of how these tools work and how they can help you preserve and transfer wealth in retirement.
About the Author:
Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group provides information to retirees who need annuities explained. For more information on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com/products/annuities.
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