One of the most useful resources that you have at your disposal when planning for retirement is a fixed annuity, mostly because it can help you set up an income stream that can support you in your retirement. A fixed annuity is an annuity that has both a set payout amount and growth rate. Listed below are three reasons to consider a fixed annuity for your retirement plan.
Hands-Free
One of the best reasons to consider a fixed annuity is that you do not have to take an active part in managing your funds. When you purchase an annuity, the professionals at the financial or insurance firm will take care of managing your accounts for you. This makes it a perfect choice for someone that wants to plan for their retirement but that does not have the knowledge, experience, or time to manage the investments on their own.
Flexible Payout Terms
Another reason to consider a fixed annuity is that it allows you to select from a variety of different payout terms. For example, you could choose to buy an annuity that will pay you for the length of your life.
In that situation, the insurance company that sold you the annuity will create a payout plan based on your life expectancy. If you end up going beyond the insurance company's life expectancy calculation, they will continue to pay the same amount of money until you do pass away. If you end up passing away before the calculated life expectancy, the insurance company will pay the remaining benefits to your beneficiary.
Also, there are fixed annuity options that can be selected that can help you ensure that your spouse is taken care of if you pass away first. In that situation, you can set up an annuity that continues to pay until both you and your spouse pass away.
Guaranteed Payment Amounts
Finally, you will want to consider a fixed annuity instead of a variable annuity because the fixed version will provide guaranteed payment amounts. The reason for this is that the insurance company that sold you the fixed annuity will stick to the terms of the contract, meaning that if they promised a certain dollar amount or growth rate, they will deliver on that promise even if it costs them money.
With a variable annuity, the value of the annuity will fluctuate based on the financial market and how the company manages your money. While this could potentially result in better growth and higher payments, it also carries the risk of you losing money and getting less benefit from your annuity than you had planned on.
Share15 July 2016
My name is Eva, and I have been a personal investment adviser for the past 15 years. I have helped many clients wisely invest their money, and I want to give you some tips I have picked up along the way. Many people discount the use of CDs in investments, and I believe that this is a mistake. Financial professionals agree that CD rates are going to rise, and you can take advantage of that now. This blog will tell you how to find CDs with the best rates, how to build a CD ladder for investment purposes, and why CDs can be better than a savings account.
