Life can be difficult for anyone, and especially when there is no steady flow of income. It can be especially challenging for retirees who have little or no energy to take up other jobs after their retirement. However, no retiree should get their heads spinning after retirement for lack of funds. They still can pursue their old age dreams while putting their investment together; thanks to the availability of annuities.
What is an Annuity?
A simple description defines an annuity as a financial product obtained from an insurance company. They come in the form of a contract, which describes the company’s agreement to take risks on behalf of the annuitant (owner of the annuity). Meanwhile, the annuitant takes up the responsibility of paying annuity premiums to the company, which are supposed to bear the risks.
Annuities are more or less like pension plans, which are nonetheless, becoming unpopular each day among retirees. You can choose to make monthly, quarterly, or annual, and better still there is the option of a lump-sum payment. After that and as long as you keep up to the obligation of premium payment, there is a guarantee of a lifetime income no matter how long you live.
Who is eligible for an Annuity?
So long as you’re in active employment, you will get into retirement age. The need to supplement retirement income for the long term shall follow you almost immediately. It clearly explains the fact that annuities are for anyone who is looking for a means of relieving fears of longevity risk or surviving on their assets.
The structuring of an annuity is dependent on an array of factors, including the certainty of time when payments from the annuity can continue. They have a structure, which provides for a payout of funds for a fixed period irrespective of how long the annuitant lives.
Annuities can either be fixed or variable. The former provides consistent periodic payments while the latter offers higher future cash flow, especially if the annuity fund is doing well. In this case, the annuitant quickly reaps the benefits of strong returns. Nonetheless, despite being so suitable looking, variable annuities have the risk of losing the principal. And while this may sound like a disadvantage, they still have the privilege of adding other features and riders.
How does one get an annuity?
Depending on what the annuitant, they can have the payout of their annuities begin immediately, and upon making the lump sum payment. There are also the deferred income annuities, which do not start paying out after the initial investment. They are the opposite of immediate payment annuity, and the annuitant must specify a certain age, which they prefer to begin receiving payments.
Seemingly, people will always dent the purpose of an annuity even though they may not be for everyone. However, if you ever decide to buy them, ensure you do so through a financial advisor. Most people have put their trust in us because of our premium products. You can also choose to do so.