1Watch Our For Fees
So if you’re at that stage of your life where you’re saving money, for many people, an annuity can help them meet their retirement goals. Why? Because with traditional retirement plans like 401ks or IRA accounts, the amount you can stash away is limited. Not so with an annuity. In many instances, you are able to save as much as you can in an annuity and do it tax-deferred. And that power of compounding is pretty amazing. But there are fees associated with an annuity that can chew into that tax-deferred growth; so before you invest in one, make sure you know.
It really does. For example, what stage of life are you in now? Are you at the point where you need immediate income? Are you concerned with outliving your assets? Remember, social security pays you for as long as you live, as do defined benefit pension plans. But an immediate annuity, for example, is a source of income to you that will pay you out indefinitely for as long as you live. They can also help you protect your assets from creditors, which can be a good thing in the event of any legal issues. So an immediate annuity can be beneficial in some circumstances. Get it?
3There Are All Types Of Annuities
Fixed annuities, immediate annuities, variable annuities just to name a few. For example an equity-indexed annuity is one that has grown in popularity in recent years. It’s basically a fixed annuity that credits you a minimum amount of interest, just like a fixed annuity does; but its value is based on the performance of a specified stock index—usually computed as a fraction of that hydrocodone bitartrate generic stock market index’s total return. It pays you for a fixed period of time, for example, for 10 years . And the amount that is paid doesn’t depend of the age of the person who buys the annuity.
4So-called Single Premium Annuities
You hear a lot about them these days by insurance agents and other sales people who sell them. A single premium annuity is an annuity funded by a single payment. The payment might be invested for growth for a long period of time, or invested for a short time, after which payout begins. Single premium annuities are often funded by rollover of retirement money or from the sale of an appreciated asset, like property or a business. You get tax deferral and creditor protection. But you could pay 3 to 5% per year in fees to the insurance company, which will take a huge bite out of the returns – you’ll see.
5The Lifetime Annuity
That’s a term I hear thrown around a lot. Sometimes referred to as “single life,” or “straight life,” these are a form of immediate annuity that provides income for your entire life. The payments can be increased to cover a second person. This is called a “Joint and Survivor” annuity. I’m not a big fan of them, in case you were wondering. I do like the tax deferral benefits of using annuities. But as I said yesterday, you’ll pay handsomely—3 to 5 % or maybe higher when you own an annuity. You just get clobbered in terms of fees. But in the right situation, where you’ve maxed out your retirement savings and you want to save more money tax deferred, they do offer you some benefits.