Everyone needs to plan for retirement, whether they’re working in the public or private sector. There are many financial instruments that can help you plan your income after retirement. Annuities are one example. Below, we will tell you everything you need to know about annuities in order to understand them.
An Overview of Annuities
Every individual has their own goals, some of which are essential for retirement. This includes having income even when you are not working, access to old-age care, building a legacy, and health protection. An annuity is a contract between you and an insurance company to cover such needs. An insurance company will consider a person’s life expectancy when offering annuity products, so you may be able to receive income not only during your lifetime, but also after you pass to provide for your family. However, different insurance companies will offer different products.
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Can You Sell Annuities
Income from annuities comes in the form of payments. However, you may find yourself in a situation where you need a lump sum. In that case, you can sell a structured settlement. Companies will buy annuities from you in exchange for the money you need to accomplish a project or settle financial obligations.
Are Annuities the Same as Life Insurance?
Annuities are different from life insurance policies. The latter provides payments to your family once you pass, while the former provides income while you are alive. If you have an annuity, you as the policyholder are the beneficiary. If you have life insurance, on the other hand, your family members are the beneficiaries.
What are the Options?
You can select different types of annuities for a retirement plan. An immediate annuity pays you now, while a deferred annuity starts paying later. Weigh your options and current financial obligations before deciding which is best for you.
The terms in the contract differ between the two options, and it is critical to understand what you are getting into. This will determine the amount of money you get, as well as the frequency of payments. Some offer fixed payments, while others vary depending on the investment. The payment period may be monthly or longer, usually does not exceed a year. It depends on your agreements with the insurance company.
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What to Do
You’ll need a sizeable first installment payment when you purchase an annuity plan. This is especially true If you want the policy to start paying immediately. While this is a viable plan if you are already retired, you may consider a deferred annuity if you are still working. Then, you can choose a date to start receiving income.
Conclusion
Annuities are suitable investments for retirement. Although you may receive other benefits from your former employer, the additional income an annuity provides will supplement your needs and give you a better life after retirement.