Owners demonstrate a certain loyalty and commitment to their purchased annuities, with 93% reporting that they still own their first annuity. But what are annuities? Annuities are a financial product that financial companies sell; their purpose is to collect and grow the funds an individual gives. After the individual has paid towards their annuity for a number of years (the longer the wait, the better), a pay out time period begins. This payout period streams money back into the individual’s pocket.
People typically buy annuities to help manage their income in retirement because they receive a check at a specified time (once a month, bi-weekly, once a year, etc.). People are buying annuities mainly for three reasons:
- They can receive payments at a specific time- they will never need to worry about when and where they will money from until the annuity is exhausted.
- Those who are named as a beneficiary receive a payment if their spouse dies. These death benefits ensure that those still living in the family are supported
- There are no taxes based on the growth of the annuity and the investment gains one makes. However, once the money is in the payout phase, this is taxed.
There are different types of annuities depending on the need of the person. Fixed annuities are when you receive, from the state, a minimum rate of interest on your annuity payout and a fixed amount of payments. There are also variable annuities- which allows one to put the money into investment accounts- and indexed annuities, which is packaged with securities and insurance products and follows stock market trends. Some people take an annuity lump sum payment, which is when they decide not to have periodic payments, but instead one large check for all of the money contained in the annuity.
Variable annuities are not advised to have for meeting short-term goals- substantial taxes and hidden fees from the insurance company may apply if money is withdrawn too early. As a result, one might ask how do I sell my annuity? Visit websites that offer to buy annuities, there are plenty of companies out there. Get a free quote from them and compare offered prices.
Buying annuities can be tricky, do your research and make sure to watch out for fraud. Always read the fine print. However, finding the right annuity, and many reap the benefits and are very satisfied with their investment.