Annuities are becoming popular options for people who are making financial plans for retirement, especially as it becomes clear that normal retirement plans offered through places of employment aren’t always dependable and can actually be taken away. If you’re thinking about becoming one of the many Americans who are buying annuities these days, here are a few basic facts about these payment plans to help you understand what you’re getting yourself into:
What Are Annuities? An annuity functions a little bit like a paycheck during retirement; you invest money into your pension account while you’re still working, and then upon retiring and/or reaching a certain age, you’re able to start getting that money back in regular installments.
How Are Annuities Calculated? You get to choose how much money to invest initially, but then the amount of money you receive in your installments can depend on a bunch of factors, such as your current age, any pre-existing medical problems you might have, if you want to include your husband/wife/significant other in the plan, and how much inflation occurs between when you first invest and when you start receiving your money.
What Are the Main Benefits of Annuities? First of all, there are a bunch of different types of annuities, and you have quite a bit of freedom to choose which type is best for you. The most common options are 1) leveled annuities, which give you regular payments each month until you die (and can even be paid out to your partner if you happen to die first, although that option is technically a different kind of annuity); and 2) fixed annuities, which give you regular payments until your money runs out.
Why Do People Try To Sell Their Annuity Structured Settlements? The simple answer here is that, like many other financial investments, an annuity isn’t the best option for everyone. And it’s easy for companies to push the benefits of annuities, convincing people to buy them, without fully discussing the drawbacks of annuities (like tax payments, and inflation problems, and even the issue of dying before you receive your entire investment and not being able to transfer that remaining money to other relatives).
So now it’s your turn to join the conversation — did we forget anything important about annuities? Be sure to share your info and opinions with us in the comments section! Helpful info also found here.
