|
 |
||||||||||||||||
|
|
|
|||||||||||||||||||
|
|
|
|
Do you know that annuities can be used for your retirement?If you plan to work at least 10 more years before you retire, annuities probably make sense in your retirement planning—and can be an even richer plan if you have 20 or 30 more working years ahead. But, annuities, rewarding as they can be, can be confusing. Let’s get "unconfused."Annuities are sold by insurance companies and are designed to provide benefits to you during your lifetime—or to your beneficiaries after your death. An annuity, which you buy for a single lump sum or periodic payments, provides guaranteed income for a time period you choose. You may choose payments to begin right away (an immediate annuity) or at a later date (a deferred annuity). You purchase annuities with after-tax dollars; happily, you don’t owe income tax on accumulated interest until you start receiving payouts. (Most annuities feature a guaranteed minimum interest rate that gives investors peace of mind. The interest rate actually credited is often several basis points higher, however.) When your chosen payout time comes, you have many options: A straight life annuity provides payments for your lifetime. A refund annuity usually pays somewhat less but guarantees that payouts will at least equal the amount you paid in premiums (any remainder after you die is refunded to your beneficiary). A joint and survivor annuity provides payments for your lifetime, and—when you die—continues payments to your beneficiary for his or her lifetime. A period certain annuity only pays for a set number of years. Ask these questions before buying an annuity: What is the interest rate? Does it change often? What is the company’s interest rate history? Can you make penalty-free withdrawals? Is there a "bailout option" that lets you cash in your annuity if the interest rate drops? If there isn’t a bailout option, what is the guaranteed minimum interest rate? Are there penalties for early liquidation? Are there administrative fees? How much are they? Your independent insurance agent can help you choose an annuity that makes you comfortable when you buy it—and long after you retire.
|
