Retirement Planning with Fixed Annuities
How can annuities build up income or savings?
Who sells annuities? Insurers market them because they combine investment and insurance features. Two common reasons people purchase them is to save for a long term goal, or to assure income later. So even though people tend to associate them with retirement income, they can also be used for other reasons.
You will also need to decide how you want to fund your cash account. In general, there are 2 ways.
Immediate - This means that a lump sum is put down to build up the cash value. After that, it starts generating an immediate income for the owner. You would probably want to consider this solution if you had gotten a lump sum distribution from a retirement settlement.
Deferred annuities do not pay out right away. In fact, the owner may have to pay a penalty if he or she takes out cash before the term that is specified in the contract. There may be exceptions for this in the case of a severe illness, etc. Some may be funded with a large payment, or they may accept cash contributions made over a period of years. These are intended for people who are trying to plan for an event that is some time in the future.
How do you get paid? There are a variety of different options for getting money back. A lifetime payout may guarantee income for life. But some people accept payouts for less time, like 10 years, or for the lifetime of either spouse (joint survivorship). They payout that you would choose would depend upon your needs and the cash value of the account.
If you are not sure that you will need the income, consider a flexible payout option. You can use this account to put aside money that could be used for an emergency if needed, or can be left to heirs if not needed.
Many people like annuities because of the favorable way that the IRS tax code treats them. They can grow in a tax deferred manner. They may be qualified or unqualified, which will affect the tax treatment of income payments.
Another advantage is the safety of fixed products. Fixed products may pay at a contract rate, or they may be pegged to a market index.
Consider one common market like the S&P 500. In good years, when the index goes up, the cash account will grow at a rate that is pegged to that market index. In down years, when the index is down, the cash account will be guaranteed not to lose money. It may either be set to remain stable, or even to earn a set rate like 2%.
Now that you understand a little bit about annuities, you probably want to know how long you can get payments for. You probably also want to know how large those payments will be. Of course this depends upon your accumulated cash value, growth rate, and the type of product you have. - 23218
Who sells annuities? Insurers market them because they combine investment and insurance features. Two common reasons people purchase them is to save for a long term goal, or to assure income later. So even though people tend to associate them with retirement income, they can also be used for other reasons.
You will also need to decide how you want to fund your cash account. In general, there are 2 ways.
Immediate - This means that a lump sum is put down to build up the cash value. After that, it starts generating an immediate income for the owner. You would probably want to consider this solution if you had gotten a lump sum distribution from a retirement settlement.
Deferred annuities do not pay out right away. In fact, the owner may have to pay a penalty if he or she takes out cash before the term that is specified in the contract. There may be exceptions for this in the case of a severe illness, etc. Some may be funded with a large payment, or they may accept cash contributions made over a period of years. These are intended for people who are trying to plan for an event that is some time in the future.
How do you get paid? There are a variety of different options for getting money back. A lifetime payout may guarantee income for life. But some people accept payouts for less time, like 10 years, or for the lifetime of either spouse (joint survivorship). They payout that you would choose would depend upon your needs and the cash value of the account.
If you are not sure that you will need the income, consider a flexible payout option. You can use this account to put aside money that could be used for an emergency if needed, or can be left to heirs if not needed.
Many people like annuities because of the favorable way that the IRS tax code treats them. They can grow in a tax deferred manner. They may be qualified or unqualified, which will affect the tax treatment of income payments.
Another advantage is the safety of fixed products. Fixed products may pay at a contract rate, or they may be pegged to a market index.
Consider one common market like the S&P 500. In good years, when the index goes up, the cash account will grow at a rate that is pegged to that market index. In down years, when the index is down, the cash account will be guaranteed not to lose money. It may either be set to remain stable, or even to earn a set rate like 2%.
Now that you understand a little bit about annuities, you probably want to know how long you can get payments for. You probably also want to know how large those payments will be. Of course this depends upon your accumulated cash value, growth rate, and the type of product you have. - 23218
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posted by X - Men @ 8:13 AM
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