If you are planning to secure your future with a steady stream of income when you retire, you might want to consider paying for annuities. While the premise of an annuity is rather easy to understand, the entirety of how it works can be quite confusing. To help you understand annuities better before deciding to get them, here is a simple guide.
Annuities in a Nutshell
Annuities are insurance contracts in which you pay a provider a certain amount of cash over time in exchange for a lump-sum payment in the future, or if you prefer it, a stream of income when you retire. Choosing the type of annuity that you will obtain is crucial because it will dictate the payout you can receive.
Types of Annuities
For starters, you can pick from three types of annuities. Before settling on one, make sure that you fully understand how it differs from the others and its associated fees. The first type is the ‘fixed annuities’ in which the company will give you a rate of interest that is not affected by the market rates. It can be further divided into ‘immediate fixed-income annuities’ and ‘deferred income annuities.’ The second type is the ‘variable annuities’ which acts more like an investment product. In this case, you will have to pick an investment option and where you will direct them. Lastly, the ‘indexed annuities’ is a mix of the two annuities stated before. While it can provide you with protection in case the market plummets, you will not be able to benefit from the market if it does well.
Why You Should Get an Annuity
If you want to secure your future in retirement, then you might want to pay for annuities. It will provide you with peace of mind because you will not have to worry about a source of income other than your benefits and pension.
Why You Should Not Get an Annuity
While it sounds tempting enough, an annuity may not be for everyone. You have to consider that the payments would still depend on the company’s ability to pay for it. If the provider you chose experiences a bankrupt, you might not receive your annuity anymore. Annuities also come with fees that might pile up quickly. Lastly, the returns of an annuity may be a lot less than what you could have gotten if you invested in other businesses.
When deciding if you should get an annuity, you must consider your current situation and calculate all possible risks. If you are still not sure, you can talk to a financial adviser and consult about your retirement plans.
At McGawion Insurance Pros, we aim to provide comprehensive insurance policies that make your life easier. We want to help you get the insurance that fits your needs. You can get more information about our products and services by calling our agency at (478) 449-6726. Get your free quote today by CLICKING HERE.