Many people have a basic understanding of annuities. Still others do not. We are going to answer some of the most common questions that we receive about investing in annuities.
Question: What is an Annuity?
Answer: Simply put an annuity is a contract between and investor and a insurance company. The majority of annuities serve as a way for individuals to accumulate money for their retirement. The money earned is tax-deferred and is guaranteed at a fixed or variable rate. The payments generally start to the annuity owner at some point in the future.
Question: Why not invest in Money Market accounts instead of Annuities?
Answer: Money market accounts and Certificates of Deposit are similar to annuities, however the most significant advantage with investing in annuities is your investment and interest earned is tax deferred. Your money compounds more quickly because you earn interest on money you would otherwise being paying the IRS. With annuities you pay taxes when you begins receiving payments. Since you will receive smaller payments than the entire sum your taxes may be less as they are spread over a longer period of time. Just like any other retirement accounts, there are penalties and tax implications for early withdraw, however annuities frequently have provisions and condition that allow withdrawal without penalty.
Question: What is the difference between Variable and Fixed Annuities?
Answer: A fixed annuity is a contract where the annuity owner knows the current and guaranteed interest rates and exactly when that interest will be credited. Fixed annuities suit the conservative investor very well as the stability of the instrument fits their investing style. In short, you know what you are investing on the front end of your purchase, with no surprises.
Tax Deferred variable annuities on the other hand invests your premium in a variety of instruments. Interest rates fluctuate depending on the performance of those instruments.
Question: What is an Immediate Annuity ?
Answer:Immediate annuities offer annuity owner sot make a lump sum payment and receive payments over time immediately or shortly after purchase. Immediate annuities are best suited for investors who have reached retirement and want to maintain a steady income in the retirement years. However immediate annuities are not limited to retirees. Immediate annuities generally require and initial payment of $10.000.00.
Question: What is The Best Annuity To Buy?
Answer: Just as there is not a best stock to buy there is not a best annuity to buy. Determining what your needs are will help your investment adviser help you decide what is the best annuity for you. The most important thing to remember is, regardless what your financial goals are, annuities can help you attain them . There is no single annuity for everyone, but there are annuities for everyone
