Are you thinking about an annuity for some of your retirement savings? Are you worried about fees? The good news is that many annuities don’t have fees, but it also depends on the annuity type you are talking about. There are five kinds: variable, immediate, fixed, multi-year guarantee, and fixed index annuities.
Variable annuities offer the most growth potential, but they also have the risk of market losses and tend to be fee heavy. The other four kinds fall into the fixed column.
Fixed annuities and multi-year guarantee annuities have guaranteed rates for a set period. Fixed index annuities can earn interest based on a market index’s performance, but the growth potential is limited. Immediate annuities start paying you income right away, while with these other fixed-type annuities you usually start income payments some years down the road.
Let’s go back to our overall fixed annuity focus. Most fixed annuities don’t have fees. Fixed index annuities don’t have upfront fees, but some add-ons to a base contract may have fees. It depends on whether you would like those add-on benefits on top of what a base contract gives you.
What about surrender charges and things like that? All annuities are long-term vehicles, and they have maturity periods. If you wish to take advantage of the benefits, then keep your money in the annuity until it matures. Otherwise, there might be a surrender charge. It’s a way for the insurance company to manage risk and keep its promises to you and many other customers.
In this article, we will go over why fixed annuities don’t have fees and how they work.
Are annuity surrender charges a good or bad thing? If you want a predictable income steam in retirement, only annuities can provide you with guaranteed payments for life or for a set period. No other financial product can truly do this.
On the other hand, a surrender charge can be a hold-up for someone who might otherwise be interested in an annuity for its guaranteed benefits. Annuities are contracts between someone and a life insurance company.
They are a long-term commitment, and if someone wanted to take out more money than is permitted or exit the contract prematurely, a surrender charge would apply. Of course, surrender charges also help insurance companies maintain their long-term promises to policyholders as well.
So, are annuity surrender charges good, bad, or indifferent? How do they work, and in what specific ways do they work for you? Are there other upsides to annuity surrender charges beyond the obvious benefit of helping the life insurance company?
The truth is, they are more of a necessary feature than a judgment of goodness or badness. In some respects, you can say they are a neutral thing. Let’s break them down into some simpler terms.
Are you wanting reliable income in retirement? Annuities are one option that you might turn to. An annuity pays you an ongoing income stream and lets you avoid running out of money. It’s the only thing besides Social Security that will generate guaranteed income for life. But of course, annuities have pros and cons, just as everything does.
When you start an annuity, you own a ‘money for life’ contract between you and a life insurance company. The insurer promises to give you regular payments for a set period or the rest of your life. Insurance companies have a strong record of meeting these commitments in all sorts of economic conditions and stock market cycles.
Annuities come in a variety of flavors. Some annuities are just base contracts, while other annuities offer add-on benefits that offer a lifetime income stream and liquidity. In other words, you have many choices and ways to customize an annuity to your personal goals, needs, and financial situation. It’s a matter of finding the right annuity for you.
In this article, we will go over the pros and cons of annuities for retirement income. As a guaranteed income source, annuities are a great way to maximize your money, but they aren’t for everyone. We will also talk about situations in which they can really make a difference.
Yes, it’s possible to buy an annuity at nearly any age. Usually there are few or no lower age limits. But annuity purchases do have older age limits. These restrictions vary based on annuity type, product, and individual contract rules.
Technically, you may be able to buy an annuity for even a child. However, most annuity purchases are with retirement money, especially IRA money. So, annuities tend to be more appropriate for people of near-retirement and retirement age. You will also see retirement savers in their 30s and 40s purchasing annuities for principal protection, safe growth, or tax-deferred accumulation in another place alongside retirement accounts. Overall, annuity buyers tend to range from ages 40-80, depending on their needs and goals.
In an old survey by Gallup of individual annuity owners, the average age for first-time annuity buyers was 51. The survey found the median age of first-time contract owners to be 52.
Since age limits can vary among annuity types, let’s take a look at those now. Read More
Annuities are a growing solution for people wanting financial stability and protection, especially in their retirement years. While all annuities can pay a steady, guaranteed income stream for life, fixed-type annuities can be appealing at times when markets are chaotic and economic conditions are uncertain. They offer the benefit of principal protection.
Of course, if you are considering a fixed annuity as part of your financial plan, you may wonder about the risks tied to owning one. After all, annuities are supposed to be a tool for managing risk, right? Who assumes the investment risk with a fixed annuity contract?
In this article, we will cover this question in depth, but here is a quick answer. The life insurance company standing behind the fixed annuity contract bears the investment risk. The insurer pools this risk across thousands of annuity contract holders, including you, and manages this risk in a variety of ways so that it can make good on its promises to you and everyone else. Life insurance companies have a strong record of fulfilling their contractual promises in good and bad economic times.
Before we take a deeper dive into fixed annuities and how insurance companies stand behind the investment risk of upholding them, let’s delve more into fixed annuities and what they involve.
If you are exploring ways to generate income in retirement, you may have thought about annuities at some point. Of course, annuities can be quite involved sometimes. They come in many flavors, and it’s quite natural to ask why people buy annuities.
The reasons are different for everybody. But one short answer is because annuities can provide more financial peace of mind with their contractual guarantees, backed by the life insurance company.
Annuities have grown in popularity, as people can use them to supplement their Social Security payouts, have a guaranteed lifetime income stream, earn interest on their money, protect their assets against market losses, and enjoy tax-advantaged financial growth. Paying for long-term care, offsetting inflation, and shielding assets from probate and creditors are a few other reasons as well.
In this article, we will delve into reasons behind why people buy annuities and how these guaranteed financial vehicles can contribute to a well-rounded financial strategy.
Retirement planning is a critical part of financial planning. It’s the point at which people leave behind a career and enjoy the fruits of their life’s work. Since they are no longer bringing home the bacon from their job or business, the money has to come from somewhere.
To that end, ensuring a secure and stable income during retirement is a top priority. While there are a variety of financial vehicles that you can tap for income, annuities are an effective way to maximize retirement income.
With their contractual guarantees, they offer a unique way to provide a steady stream of income throughout retirement, helping retirees maintain their lifestyle and meet their financial needs. The risk tied to annuity payouts is pooled by insurance companies across thousands of contract holders, creating efficient risk management that no individual retirees can produce by themselves.
In this article, we will cover using annuities for retirement planning, their benefits, and some reasons for including them as part of a comprehensive retirement plan. Before going further, let’s cover the basics of annuities.
You may have heard of an “annuity bonus” if you have ever looked at annuities before. Bonuses are just one annuity feature, but are they warranted? Are these annuity bonuses a good thing in general, or are they more of a good fit in certain situations?
In this article, we will go over the basics of an annuity bonus, what it involves, what situations in which you might consider one, and the pros and cons of an annuity bonus. In general, annuities that come with a bonus are called “bonus annuities.”
If you are like millions of other workers in America, you have probably saved for retirement in an IRA, a 401(k) plan, or another tax-deferred account. The chances are also high that you worry about running out of money in retirement. Fortunately, you can put some of that fear to rest by having an annuity as part of your overall retirement strategy. Annuities are fundamentally unique savings vehicles because they can pay you a guaranteed, set stream of income that will last as long as you do.
Annuities can supplement your Social Security payments by providing additional guaranteed income that will remain steady regardless of how the markets perform. They can also help ensure that you have enough money coming in every month to cover all your living expenses.
In this article, we will go over more of the steps of how to roll over an IRA or 401(k) into an annuity. None of the steps are especially complex, but they must be done properly to ensure no tax consequences from the rollover (unless you are converting your annuity to a Roth account). To start off, let’s talk more about why someone might want to move some of their retirement money into an annuity.
Suze Orman is a household name for personal finance. She has published many financial books, and millions of listeners tune into her interviews and radio shows. If you have ever heard Suze talk about annuities, you may wonder whether her annuity opinions are on the mark or are a nothingburger.
Yes, opinions are subjective, but even the self-styled “Money Lady” gets it wrong on annuities, especially fixed index annuities. That does a disservice to retirees and those planning for retirement. Ultimately, it limits their options that could help them reach their financial goals: paying them reliable monthly income, giving protection against market risk, offering guaranteed growth above what various fixed-interest assets may earn, and providing other benefits.
Another issue with Orman’s anti-annuity stances is that they often capture only part of the picture of a specific annuity kind or feature. Just like other financial products, annuities come in many flavors, and each one has its own strengths and purpose.
In this article, we will focus on Suze Orman and her public statements on fixed index annuities — and how these opinions miss the mark on how the unique guarantees of these products can help people in retirement.
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