How Annuity can help you?
Life after retirement is tough. Especially, if you are not financially backing yourself. Even if you have a retirement plan, it might be enough for basic needs, but won’t allow you to do what you love or spend even a single extra buck on luxuries. And, no person in the world deserves that. Thus, if you are a working professional, you must sign an annuity contract with your insurance company and ensure the amplification of your savings after you retire.
Firstly, what an annuity is? In layman language, an Annuity is a contract you sign with your insurance company under which you make sequential contributions over a specific period of time and your insurance company makes periodic payments to you, mostly after you retire.
In today’s era, retirement plans and other benefits a retired person gets might not suffice at all. It can help you to fulfill your basic requirements, but as mentioned, you won’t be able to spend even a single buck on your interests. Thus, if you are looking for a guaranteed extra source of income, an Annuity is for you.
Types of Annuity
There are three types of annuities: Fixed, Variable, and Indexed. Below, we brief each of these annuities so you get a clear idea of which type do you require.
- Fixed Annuity: Fixed Annuity comes with a specific rate of interest on the amount you invest. However, the rate of interest can vary after a specific period of time, usually annually.
- Variable Annuity: With Variable Annuity, you can invest your money in different investment funds, like mutual funds, stock market, etc. The returns from this type are usually higher, but, the chances of loss are also a bit higher as compared to the fixed annuity.
- Indexed Annuity: This type of annuity merges both, fixed and variable annuity. With this annuity type, you will be paid an interest rate according to the specified market index, like S&P 500.
What are the benefits of Annuity?
Below we explain the benefits that Annuity brings alongside it for a retired person. Enjoy your read:
- Guaranteed Source of Income: As an investor, before investing, you always think about the guarantee of returns. And, if you go with a fixed annuity, your returns are guaranteed. A fixed annuity has nothing to do with the things like market rate, interest rates, etc. Thus, you will be getting a fixed return amount without any loss after you retire.
- Choosing the Timeframe: Another major benefit of having an Annuity, you can decide when you wish to receive the income. It can be after your retirement, or even before you retire. Thus, you can always keep your mind peace with an assurance of the fact that you will always have money with you if any emergency arises. Most people never decide in advance about the withdrawal timeframe. Such is the flexibility an Annuity offers.
- Tax-Deferred Returns: For most returns that you get for investment, you pay a considerable amount of tax which clips off your returns. But, with an Annuity, you don’t pay any tax until you withdraw the money. Also, the tax rates on an Annuity are minimal as compared to other investments.
- No Reinvestment Risk: One of the major benefits an Annuity comes with is that it eliminates the risk of reinvestment to a great extent. For other sources, when you reinvest your amount, chances are there you might get less premium price. While, with an Annuity, the same amount of returns are guaranteed. Thus, you need not worry about the amount you will get by any means.
- Enhances Your Stability: Once you retire, the stability of income you receive will be the most important thing for you. Agreed, pension plans and retirement benefits are there to stay. But, an Annuity that is already a very stable source of income and guarantees decent returns can work as another stable source of income for you. And, the more stable sources of income you have, the more your mind will be at a peace.
- No Limit to Contributions: With an Annuity, there is no minimum or maximum limit on the amount you pay to your insurance company. You can decide & pay the amount according to your convenience. You will get the returns accordingly.
- Death Benefits: If a person goes with a Variable Annuity, the beneficiary also becomes liable to death benefits. Thus, if you pass away, the insurance company will be paying a death benefit amount to the beneficiary.
- Guarded Against Market Losses: All Annuity types other than the Variable Annuity class are shielded against market losses. This ensures you will be getting returns with minimal/no loss even if market rates fall. This is a major benefit Annuity offers specifically when the market is fluctuating every now and then.
An Annuity can be your definite answer if you are in search of a stable and decent growth option after you retire. With the number of benefits an Annuity offers, investing even a small amount of your income is absolutely worth it. To get an Annuity, or to get a detailed analysis of the returns you will get for your investment, reach out to your insurance company now.