What are deferred annuities

what are deferred annuities

Deferred Annuities

With all of the different kinds of investments out there, you may have heard of deferred annuities. but were never really sure what they were. Deferred annuities can be a great way to put away money for the future, and you do not have to pay taxes on it until later in life. With these ways to save, you can earn much more on your principle than you would with a standard interest bearing bank account.

Deferred annuities give you a contract with an insurance company that allows you to invest a little at a time for a prescribed number of years, and then at the end of that period you can either get a lump sum payment, or you can turn it over to an immediate annuity. There are penalties for early withdrawals which varies from company to company and they usually last only until your account has broken even, which also differs between investments.

You will be able to choose between a fixed and a variable deferred annuity. When it is called “fixed” it means that your profits are tied to the interest rate which though it goes up and down, does not fluctuate too violently. A deferred annuity is very low risk, but with limited rewards. This is a great choice if you are planning your retirement on a fixed income as you will know approximately how much you will be getting at the end of it, give or take a little.

The

variable type is tied to how the market behaving, and as we know, it can sometimes be quite volatile, sometimes to your advantage. It is definitely a higher risk, but as with anything higher risk it can also have higher payouts. You will have to do a little research on the market so you can decide what you think what you think your returns will be years down the line. This is a good option if you can afford to take a loss if it does not go so well; if you think that later on you might be strapped for cash, you could consider the other alternative.

Any qualified financial adviser can help you choose, not only between a fixed and variable annuities. but they will also give you their expertise on the market and their opinion on how it will perform over time. For a first time investor, or one with little experience this might be the way to go. Find someone who you are comfortable with and know their fees upfront; it would do you much good if what you owed them outweighed your return.

Now that deferred annuities are not such a mystery anymore, you can start doing your research and finding the one that best fits your budget and your lifestyle. Investing in deferred annuities is a smart way to save for retirement, and it is always nice to know that there will be a little extra money for you when you get there.

Source: annuities-explained.net

Category: Credit

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