A Glimpse into Annuities

by Minority Fortune

Annuities can be another great investment for retirement. They are an insurance product that pays out money after a flexible period in either one sum or in intervals. These can be an attractive option if you have maxed out 401K and IRA contributions.

Annuities have their perks. They don’t have a maximum contribution amount. You can invest as much money as you like. They have flexible terms, meaning you can opt for payouts for a certain period or for your lifetime. They’re also tax deferred until payouts are made.

chartsThis product can come with some disadvantages as well. If you start withdrawing against the predetermined timeframe (usually 5-7 years), there will be a surrender charge. Some annuities have high maintenance fees. Then there’s the insurance company’s percentage cut. However, there are some firms that boast low-cost annuities: Fidelity, Vanguard, Schwab, T. Rowe Price, Ameritas Life, and TIAA-CREF.

There are two types of annuities: deferred and immediate. With a deferred annuity, payouts are deferred for a predetermined amount of time. With an immediate annuity, payouts begin immediately. An immediate annuity is most likely needed for those near retirement.

For more information on annuities, check out this site.

*Image courtesy of Imagemore.
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