Do Annuities Help Plan for a Retirement Income
How can annuities build up income or savings?
Who sells annuities? Insurers market them because they combine investment and insurance features. Two common reasons people purchase them is to save for a long term goal, or to assure income later. So even though people tend to associate them with retirement income, they can also be used for other reasons.
There are two main types of way to build up the cash value, so something can start generating income for retirement.
An immediate annuity is funded by one large sum at the start. Consider a retiree with a lump sum payout or a person who has inherited cash from a family member. This product, as the name implies, begins to make income for the owner right away.
Deferred - These must be kept intact for a period that is specified in the contract, and are meant to accumulate cash value over a period of years. They can be funded with one lump sum, periodic contributions, or some mix of the two. You would probably consider this to fund a retirement that is several years in the future.
How do annuity payouts work? By now you probably realize that you are investing your cash in order to be able to withdraw cash back. Some annuities may be guaranteed to pay for life, while some may only pay for 10 years. The option that you choose will depend upon your own assets, needs, and individual circumstances.
You can also find annuities with flexible options, so that the owner does not need to take payments. Some people use this to set aside an emergency fund or leave money for their heirs.
One big advantage of buiding cash this way is favorable tax treatment. Both gains and compouding are free to go without being taxed. Income may or may not be taxed depending upon the qualified or non-qualified tax status of the contract.
Many people consider fixed annuities because of their safety. Risk is minimized if they pay at a contract rate, or even if they are tied to a market index.
Consider one common market like the S&P 500. In good years, when the index goes up, the cash account will grow at a rate that is pegged to that market index. In down years, when the index is down, the cash account will be guaranteed not to lose money. It may either be set to remain stable, or even to earn a set rate like 2%.
Now that you understand a little bit about annuities, you probably want to know how long you can get payments for. You probably also want to know how large those payments will be. Of course this depends upon your accumulated cash value, growth rate, and the type of product you have. - 23223
Who sells annuities? Insurers market them because they combine investment and insurance features. Two common reasons people purchase them is to save for a long term goal, or to assure income later. So even though people tend to associate them with retirement income, they can also be used for other reasons.
There are two main types of way to build up the cash value, so something can start generating income for retirement.
An immediate annuity is funded by one large sum at the start. Consider a retiree with a lump sum payout or a person who has inherited cash from a family member. This product, as the name implies, begins to make income for the owner right away.
Deferred - These must be kept intact for a period that is specified in the contract, and are meant to accumulate cash value over a period of years. They can be funded with one lump sum, periodic contributions, or some mix of the two. You would probably consider this to fund a retirement that is several years in the future.
How do annuity payouts work? By now you probably realize that you are investing your cash in order to be able to withdraw cash back. Some annuities may be guaranteed to pay for life, while some may only pay for 10 years. The option that you choose will depend upon your own assets, needs, and individual circumstances.
You can also find annuities with flexible options, so that the owner does not need to take payments. Some people use this to set aside an emergency fund or leave money for their heirs.
One big advantage of buiding cash this way is favorable tax treatment. Both gains and compouding are free to go without being taxed. Income may or may not be taxed depending upon the qualified or non-qualified tax status of the contract.
Many people consider fixed annuities because of their safety. Risk is minimized if they pay at a contract rate, or even if they are tied to a market index.
Consider one common market like the S&P 500. In good years, when the index goes up, the cash account will grow at a rate that is pegged to that market index. In down years, when the index is down, the cash account will be guaranteed not to lose money. It may either be set to remain stable, or even to earn a set rate like 2%.
Now that you understand a little bit about annuities, you probably want to know how long you can get payments for. You probably also want to know how large those payments will be. Of course this depends upon your accumulated cash value, growth rate, and the type of product you have. - 23223
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To get more help, look here - Explain Annuities. Find defereed or Immediate Annuity Quotes.
posted by X - Men @ 6:05 AM
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