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Annuities Up Close and Personal

You have heard the word many times in passing. Annuities. You know annuities involve investments that will provide for the future, but you may not know much else about them. Annuities can benefit many people from all walks of life when properly used.

After understanding the actual design of an annuity and how it can help you, you may actually change your entire way of thinking about them.

What is an Annuity?

The term “annuity” is actually broad and covers a wide range of options. It is most often described as an investment or a kind of insurance that gives the investor a specified amount of annual sums, thus it is called an annuity plan because it provides annual payouts.

An annuity is basically a fixed sum of money paid to an individual or group every year. This sum is usually paid every month for the remainder of the payee’s life but can vary depending on how it was setup.

Investors often choose annuities because they will supplement retirement income easily, helping to boost the steady stream of retirement income so he or she can maintain the lifestyle desired.

Purposes for Purchasing an Annuity

There are many reasons to purchase an annuity, and all of them are actually very beneficial. Here are some of the most common reasons that people choose to purchase or invest in an annuity.

  • Steady Retirement Income
  • To Cover Educational Expenses of a Child
  • To Boost Regular Income
  • To Protect Savings
  • To Boost Your Nest Egg
  • Generate an Additional Income Stream

All of these are legitimate and popular reasons for purchasing an annuity. An annuity should be viewed as protection and works much like insurance. It ensures you have the extra funds you need at the time you need them.

What You Need to Know Before Buying an Annuity When buying an annuity, you need to know several things so you can decide if the purchase is the right choice for you and your situation.

In some cases, when you buy an annuity, you can put money aside each year to increase the value of the account. During the investment period, you don’t pay taxes on the account. However, when you begin receiving payments they are taxed as regular income.

Depending on the annuity, they may provide an additional income stream that you don’t outlive. This means that you will only receive payments until the money runs out. Look at this aspect as you plan ahead for your long-term financial needs.

Look at the fees paid to the insurer. They get to keep any funds beyond the payments that you have been promised. After your death, they can keep any funds that are left in your account after they settle your obligations to your heirs. Again this is not a hard and fast rule for every case and scenario.

When looking at annuities in their basic form, they are divided into deferred and immediate annuities. They are operating under strict, precise rules that can be very complicated. So, view annuities much like Social Security. You get a set amount of money regularly beginning at a certain age.

Contact us to learn more about selling an annuity that you may have and want to exchange for a lump sum of money today.