The best retirement annuities to opt for
Annuities are investments where a person invests a consolidated amount of cash. This amount gives them a fixed payment for a certain period of time. In an immediate annuity, the monthly income starts right away while a deferred annuity offers payment after a period of time. A deferred annuity offers more substantial payout than immediate annuities because in it the insurance company gets ample time to invest your funds.
It is said that annuities are not bought, they are sold. Mostly, annuities are believed to be extremely expensive financial products. Annuities become quite important in a scenario where fewer people are covered by pensions. Needless to say, good annuities are hard to find. As annuities are quite expensive, it is important that proper research is done before opting for any one of them.
In this article, we will discuss everything about annuities and the top retirement annuities for you.
What are some things to keep in mind while buying a retirement annuity?
- Buy an annuity when the interest rates are high to get a good value overall. If you buy it when the interest rates are low, you will get less value.
- You can transfer your retirement funds in the individual retirement account to your annuities.
- While signing the contract, look for words such as “surrender charges” and “withdrawal rates” and understand what they mean thoroughly.
- Annuities are not inheritance. You cannot leave them to your children, your alma mater, or your favorite charity. Even if you are able to do so, it will come at a high cost.
What are the types of annuities?
- Immediate annuities– This kind of annuities entitle you to a payment as soon as you have invested in it. However, it should be noted that these annuities offer less value as compared to deferred annuities.
- Deferred annuities– In this kind of annuities, your money is invested for some period determined by your insurance company and agreed upon by you. Once that period is over, you can begin to make withdrawals.
Who should invest in an annuity?
- Annuities are most beneficial to those who have exhausted their taxed deferred contributions to 401(k) plans and individual retirement account (IRA) plans.
- Annuities come with no limitation on the amount that you can invest.
Which are some of the top retirement annuities?
According to Forbes, some of the top retirement annuities to look for are:
- The top fixed rate retirement annuities include Sentinel Security Life, Colorado Bankers, Minnesota Life, and North American.
- The top immediate annuities of 2018 include Minnesota Life, Integrity Life, and Nationwide.
- The best deferred annuities of 2018 include Mutual of Omaha, New York Life, and Lincoln Financial Group.
- The top low-minimum subscription income deferred income annuities of 2018 include Guardian Life, MassMutual, Principal Financial Group, and Blueprint Income.
What is the best time to invest in an annuity?
- Even though annuities are a good choice to make, investing in them should not be your first or second priority.
- You should first invest in other retirement savings accounts that provide contribution matching or tax deferral.
- Before considering an annuity, you should invest at least 15% of your gross income in the accounts mentioned in the second point. Once you have maxed them out, you should consider investing in gratuities.
What are some pros of investing in annuities?
Some benefits or advantages of investing in annuities are:
- They give you a fixed income for life.
- Annuities offer you a tax-deferred status. You do not pay anything to the government until you withdraw the funds, unlike other retirement investments.
- If you opt for a fixed retirement annuity, the market vagaries will not affect the rate a lot. You will get, more or less, a fixed rate for a considerable period of time.
What are some cons of investing in annuities?
Some disadvantages of investing in annuities are:
- Annuities are more expensive compared to mutual funds.
- Many annuities come with a surrender fee, which can be on the higher side.
- The intricacies of annuities are often complicated to understand for many people.