4 Fast Facts Regarding Annuities

Investing can be challenging. From stocks and bonds to 401ks and Roth IRAs, it is easy to see the overwhelming nature of financial planning. While you may have a retirement account set up with your employer, investing in an annuity is a great option to consider when planning for your retirement. Unfortunately, most people do not fully understand the complex nature of this investment option. With this guide and the help of your financial advisor, you will know a bit more about annuities.

Insurance Products

You may think investing in annuities is too risky, but that is not the case. While surprising to learn, annuities are sold by insurance companies. The FDIC may not insure the annuity, but the insurance company's assets will protect your personal investment.

Guaranteed Interest

Earning money is the goal of investment, but earning is not always possible with traditional investment accounts. Thankfully, investing in an annuity is a smart option, since you are basically guaranteed some gains on your initial contribution.

If your annuity has not accumulated any interest by the end of its term, the insurance company will apply a guaranteed interest rate to your account. To ensure you receive a decent rate, make sure to discuss your guarantee at the beginning of your annuity purchase.

Variable and Fixed

One of the greatest benefits you will come to realize is that you can invest in a fixed or variable annuity. The fixed option is simple and even, but it does not offer as much of a return on your investment. Due to this, many people choose to invest in variable annuities.

Variable annuities allow you to receive payments for the rest of your life. If you pass away, your beneficiary will continue receiving these payments. The variable option is also tax-deferred, meaning you do not have to pay taxes on the investment gains until you actually withdraw the money.

Simple Withdrawal

Cashing out your investments can be tricky, but withdrawing funds from your annuity is actually a simple process.

If you become sick or injured and require expensive treatments and care, you can withdraw money from your annuity without any penalties. Also, you can withdraw a small percentage from the annuity each year for your own personal benefit. This is also completed without any questions or penalty fees. This percentage is designated and set in place early in the stage of purchasing your annuity.

Investing for your retirement does not have to be stressful. With proper understanding and the help of your advisor, you will learn if annuities are right for your retirement planning.