If you are planning to make annuity part of your retirement, then it’s essential to understand the breakout of the plan. An annuity is in general a series of payment over a fixed period of time. It gives a steady source of income in the future. Payments are carried out in numerous ways. Depending on the annuity, you can make payment in a lump sum and then receive payments lifetime for some years. Money can also be deposited in installments and then receive regular payment. Return amounts are also of different types like fixed and variable amounts. With so many annuities in the market, it becomes quite confusing to choose the suitable one. Through this article, it has been tried to solve the conundrum and to reveal the realities behind it.
All annuities are the same
There are wide ranges of annuities also as there are stocks and bonds. Generally, there are two types of annuities: an immediate annuity and a deferred annuity. With an immediate annuity, you deposit and lump sum amount and immediately start earning. With a deferred annuity, you get money after a long period with fixed rates of return.
Annuities have a low rate of return
Annuities have a set rate of interest. Fixed annuity enables you to know the total amount you are going to receive in future because it has a fixed rate. If you are going for variable annuity, the amount depends on the stock market. So, the amount may be more as well as less also than the principal amount.
Annuity fees are much higher
Annuities fees are varying and depending on various factors. You need to understand the expense before signing something. Variable annuity depends on the expense risk fee, management charges etc. The fee also depends upon the life expectancy so the charges may vary for different age groups.
After death, money will be kept by insurance company
It is expected to get huge money when you opt for life only plans and the rest money for to the insurance company. But, if you have beneficiary agreement, they are entitled to receive your money after the death. Read terms and condition properly before coming to the agreement. Many insurance company include beneficiary terms in their base contract. However this terms may incur some additional charges.
So, invest your money wisely after a lot of market research.