Making the decision to invest can be scary for a first-timer. With so many options and possible wrong turns, a lot of people don’t even want to try. A great place to start is with an annuity. There are a lot of advantages to investing in an annuity, but if you’re new to the game, you’ll need to know what you’re looking for. Here are some handy tips to help you shop for the annuity that will work best for you.
Understanding Different Types of Annuities
Before you decide which annuity is best for you, you should understand the different types of annuities available. There are two different payment options, immediate and deferred. Each one has its benefits.
Immediate annuities allow you to invest a certain amount of money, and then immediately start receiving payments. This payment plan allows you to receive income for a set amount of time, or for the rest of your life, or the life of your spouse. You can also do a combination of the two options.
Deferred annuities are better suited for those who like to plan ahead. The payments are usually set to disperse at a much later date, usually around retirement. This option allows you to make withdrawals from your account before you start receiving your pay outs. Whether you invest one lump sum up front, or make payments, your money grows, tax-deferred until until you’re ready for your payments. This is typically the most purchased form of annuity.
Investment options
Once you decide on a payment option that works best for your situation, you can decide on which investment option you’d like. You can choose between Fixed annuities or Variable annuities.
Fixed annuities are typically invested in high-grade corporate bonds or government securities. This option guarantees a rate of return over a designated span of time, usually about 1 to 15 years. Your payments will not be affected by any fluctuations in the market. This option is best for those who aren’t seeking to take any big risks with their investment.
Variable annuities are a contract made between you and the issuer where you give them principal, and in return they give you a variable payment over a designated span of time. Variable annuities offer more options than fixed annuities because you have more investment options, you can invest an unlimited amount of funds, and you can take advantage of living and death benefits.
While this is a riskier option, you also have the potential for high rewards. Before you decide which is best for you, it is wise to seek Annuity Assist from a reputable company and avoid any potential pitfalls.
Do The Math
Once you decide upon a payment plan and an investment option, you have a few more things to think about. The first is to determine how long of a payment plan you want and need. The length of time chosen will affect the size of your pay out. If you need more money each month, it’s best to go with a short pay out period. If you want a life time pay out for you and your spouse, or heirs, you should expect a lower payment each month.
You should also think about how much you want to invest. Try to plan ahead and budget the expenses you’ll have during retirement. These are typically things like mortgage, property tax and insurance. If your retirement fund, social security or pensions won’t cover all of those costs, you can invest more in your annuity for a higher pay out later.
As with most things, there are always fees to consider. When making a decision about your annuity investments, do a little digging to find the insurer that works best for your budget. You can find different fees for returns and benefits offered at various locations, so take the time to do the math. You can calculate your monthly payout, surrender fees, and expenses by using helpful tools like an annuity calculator so you won’t be surprised later on down the road.
Before you make any decisions about which annuity is going to work the best for you, be sure you understand what you want and need first. Go through your budget with a fine-toothed comb. Figure out where your money is most needed first. If you’re young and just starting your family or career, focus on paying off your debts and mortgage. Once you’re in a more stable position, you’ll be better equipped to invest your money in the annuity that is right for you.
Author Bio
Writer Molly is a prolific writer who spends all her time on the Internet writing about everything that fancies her. She is a well sought after guest writer who can write across all niches including, but not limited to, tech, gadgets, travel, finance, education, health, etc. You can find her on Twitter as @WriterMollyP.
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