For individuals who are thinking about purchasing an annuity to complement their income and savings during retirement, it’s important to understand the different types of annuities, how annuities work, the risks and benefits of annuities, and whether or not purchasing an annuity is a safe financial choice. At Top Investment Solutions, our annuity experts are here to answer all of your questions about annuities and other financial products. Reach out to us today to learn more.
An annuity is a contract between an individual (the annuity holder) and an insurance company or another financial institution. The contract stipulates that in exchange for a premium or lump-sum payment, the insurance company will make regular payments to the annuity holder, creating a stream of income. These payments may last for the annuity holder’s life or for another predetermined period of time. Some annuities are fixed, which means that the annuity grows at a fixed rate and is low risk; other annuities are variable, which means that value is based on market rates.
For retirees, annuities can provide a steady stream of income. For retirees without other retirement savings, payments from an annuity can be immediate, providing much-needed support. Some of the benefits of annuities include income that you can’t outlive, tax-deferred distributions, and guaranteed rates for fixed annuities.
Of course, there are also risks associated with nearly all financial decisions. Some of the downsides of annuities include that annuities often require considerable fees to set up and manage, and that annuities don’t provide a good option for liquidity, which means that if you need emergency cash, you can’t use your annuity to get it.
Generally, purchasing an annuity is a safe financial choice if you’re working with a reputable insurance company/financial institution. Annuities are designed to supplement retirement savings and take the risk out of retirement, not create more financial risk. That being said, if you’re very risk-averse, it’s a good idea to choose a fixed annuity. You should always consult with a financial professional about your options before purchasing any financial product.
At Top Investment Solutions, we are here to answer your questions about annuities and support you as you navigate your financial future. For answers to all of your questions or to learn more, reach out to us directly by phone or online at your convenience.
This material is not a recommendation to buy, sell, hold, or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition or particular needs of any specific person. Investors should discuss their specific situation with their financial professional.
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