Planning for the Future: A Beginner’s Guide to Annuities
It’s never too early to start planning for your future. Annuities are one way to make sure you’ll have a steady income even after you’ve stopped working. There are different kinds. Some will provide a guaranteed annuity payment,while others will offer variable incomes. There are a lot of complicated concepts involved, but here are some of the basics:
What Are They
Annuitiesare contracts between you and an insurance company that cover specific goals. They can include principal protection, lifetime income, legacy planning, or long-term care costs. Having one will ensure that you’ll have steady income throughout your retirement. After all, even if you can’t work anymore, you’d still need a consistent stream of funds for necessities such as food, clothes, and medical care.
Types of Annuities
- Fixed – If you’re looking for a stable source of income, this might be what you want. It’ll give you guaranteed annuity payments over a period. The amount of money you receive and the duration will depend on the terms set in your contract.
- Variable – When you retire, you might still have to pay for your kid’s college tuition. Or maybe you want to go on a big vacation. If that’s the case, this might be the kind of annuity you want. With it, you have a chance of receiving a larger cash flow depending on your fund’s investment performance.
Are They a Good Idea?
It depends on your circumstances. If you already have a good pension or a source of income that can support your everyday needs in retirement, then you don’t have to buy one.
But if you don’t, you should start thinking about it. They’re an insurance product, which means you’re buying them to reduce risk. If you want to secure you and your loved ones’ futures, then they’re a good investment to make.
Benefits of Having One
The biggest benefit of buying an annuity is that you’ll have an income for life. You can plan for what happens after your retirement. Use the money to go on trips, cover your medical costs, or take care of your loved ones.
You can also protect the people you care about through this investment. They usually come with guaranteed payout methods for your designated beneficiaries if you pass away before your withdrawals begin.
These are just a few basic concepts to get you started. Now that you have the information you need, you can make an informed decision.You have the option to choose a plan that will give you guaranteed annuity payments or one that offers a variable income. The choice on how to guarantee your future is still, ultimately, up to you.