Is Your Retirement Bothering You? Invest In Annuity Plans For Secured Life

For many years, financial planners and insurance brokers have invested the retirement funds of their customers in annuities. The large commissions given to annuity salespeople and the high fees assessed to annuity owners year after year are frequently the targets of criticism of this practice. In fact, there might be a significant cost difference between a mutual fund and an annuity, with the latter being more affordable. So, before making an investment, it pays to understand the specifics of annuities.

A contract for an annuity is made between a person and an insurance provider. The insurer guarantees to pay the investor a consistent stream of income in exchange for their contribution, which may be made in full upfront or in instalments over time.

An immediate annuity provides such income practically immediately. With a deferred annuity, it begins at a later date, usually at retirement. The account balance and investor age are just two examples of the variables that affect how much the income payments will cost.

It is possible to design annuities to provide income for a predetermined period of time, such as 10 or 20, or for the lifetime of the annuity owner. Any money in the account after the owner’s death usually belongs to the insurance provider. However, the insurance provider must continue making those recurring payments even if the insured person lives happily to, say, age 135 years.

Additionally, annuities can be fixed or variable. In a fixed annuity, the insurance company returns the investor’s funds at a predetermined rate. In a variable annuity, the insurer places the funds in the investor’s choice of a portfolio of mutual funds, or “subaccounts,” and the return varies according to how well they perform.

Advantages

Reliable income

Adaptable features

Assistance with managing finances

Drawbacks

High commissions

High prices

Charges for surrender

Penalty taxes

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