With a fixed annuity, you’re able to lock in an interest rate-like 3% a year. This guaranteed income can supplement a retiree’s overall income from sources such as Social Security or an individual retirement account ( IRA). Guaranteed IncomeĪn annuity can provide guaranteed income, either right away or over a period of time. Advantages of Annuities Regular Income Paymentsĭepending on the type of annuity, you can receive a lump-sum income payment, or income payments on a monthly, quarterly or annual basis. Your payout can be in the form of a lump sum of money or a series of separate payments. You pay for an annuity all at once or through a series of payments. Under your contract with an insurance company, your annuity is supposed to make either immediate or future payouts. annuity sales were $254.8 billion, according to the Security Retirement Institute. It pays while you live life insurance pays when you die,” the Indiana Department of Insurance points out. “The annuity contract is often described as being the opposite of life insurance. In short, an annuity is supposed to be a long-term investment vehicle. Rather, it’s a contract that’s designed to provide a stream of income, most often for retirement. There are a variety of different types of annuities available, but three of the most common are:Īn annuity is not a life insurance policy or a savings account. Annuity investors hand over a single premium payment or several premium payments in exchange for a single payout or several payouts. What Is An Annuity?Īn annuity is a contract between you and an insurance company. Let’s take a closer look at the pros and cons of annuities, and how they can help your retirement savings last for the long haul. “Annuities are the only product in the entire financial universe able to provide guaranteed income for a set period of time,” says Ryan Brown, a partner at financial planning firm CR Myers & Associates in Southfield, Michigan. Like any other retirement savings tool, annuities come with advantages and disadvantages. Annuities are a great way to secure guaranteed income as part of your retirement plan.
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