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| What is a Fixed Annuity and How Can it Benefit my Retirement? |
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| Written by John C. Ryan |
| Tuesday, 03 November 2009 10:39 |
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Annuity insurance is a long-term investment in which the investor makes up front or on-going payments, and in return gets paid interest and their principle at regular intervals for their retirement. Payments to the investor can be for life, or for a set period. Annuity insurance can provide many benefits including unlimited contributions to a tax-deferred income stream. Annuity payments give retirees structure, and a beneficial way to plan their spending, and ensure money for life. There are three main types of annuities: fixed, variable, and indexed. Here we will focus on the safest, and most common type; fixed annuities. A fixed annuity ensures a standard rate of interest on your investment for a stipulated period irrespective of fluctuations in the economic status of the marketplace. A fixed annuity provides investors with security against the on-going fluctuations of the marketplace. Negative gains are taken out of the equation, leading to a positive, steady cashflow at set intervals for retirement. On top of the security, fixed annuity investors receive tax-deferred interest, at a rate that is often higher than other "safe" investments such as CD's or low-risk bonds. Fixed annuities can be paid out in one of two ways. An immediate annuity provides payments to the holder as soon as the annuity insurance is purchased. To qualify for this, the investor must be at least 59 and a half, the minimum age to receive payments without penalty. If you are over 60, you can still choose the other option if you wish; a deferred annuity. The second type of fixed annuity is the deferred fixed annuity where the principal amount is left to mature for a certain period of time in a non-taxable form and the interest earned is obtained on the completion of the given period. By now, you may be thinking a fixed annuity would be a smart investment, and they are the right choice for many people. However, you should always consider all the facts. They are not right for everyone. Before considering a fixed annuity always consider your financial needs and requirements. A drawback of annuities is that they penalize investors for early withdrawals. If you ever need to withdraw your money from an annuity, you are able to do so, but if done before the age of 59.5, you will be penalized by the IRS and likely the insurance company as well. This article is an overview of a fixed annuity, but it is nowhere near a complete assessment. Always consider the financial implications, and your personal situation before making a decision on any investment or insurance product. About the Author: John C. Ryan writes articles about annuity insurance, attempting to provide individuals with the knowledge they require to assess their fixed, variable, and index annuity options. Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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