Frequently Asked Questions About
Annuities
- What are the major advantages of annuities?
- What are some of the major types of annuities?
- Which annuities are right for me?
What are the major advantages of annuities?
Annuities offer tax benefits, risk aversion, security and
flexibility. They help in building substantial funds for
retirement, providing an income that won't be outlived,
which is a major concern for many retirees. Since the general
assets of the insurance company back annuities, they solve
long-term financial needs in a better and more protected
way than most other alternatives. An annuity can also reduce
taxes and allow the investor to decide when to pay them,
since the earnings accumulate income tax free and are deferred
until the dollars are withdrawn. Additionally, naming a
beneficiary for an annuity can help in avoiding protracted
probate proceedings.
What are some of the major types of annuities?
A fixed deferred annuity provides the security of a guaranteed
interest rate, making it a good fit for those who are saving
for retirement and seeking tax deferral advantages. Variable
annuities are flexible enough to reflect the gains of potential
market growth, making them more of a risk-reward proposition.
An income annuity alleviates concerns about outliving your
income by supplying a guaranteed retirement income for investors
who are already retired or nearing retirement.
Which annuities are right for me?
It will
be up to each person to decide which type of annuity best
serves his or her lifestyle and budget. Different investors
have different portfolios and different needs, so certain
annuities may be ideal for some, but not for others. As
a general rule, however, if you have short-term liquidity
needs or a necessity for current income, not all annuities
are going to be the right fit for you. |
