An annuity is a long-term insurance plan, which allows people to receive a guaranteed income over a long period of time. The most common people to use annuities are people who are retired because they are able to receive a steady income. Additionally, annuities allow people to earn money tax-free until the money held in them is withdrawn.

When you near retirement age, you can purchase a lifetime annuity. A lot of people fail to think about retirement, thinking only about the present.

This post will explore this topic in greater detail, explaining how you can select the right annuity, and why they are so important.

Why Should You Buy An Annuity?

As mentioned in this post’s introduction, a lot of people don’t think about their retirements. If you do not have a pension, then how are you going to support yourself post-retirement? You can’t rely on handouts from family and friends, because this puts a heavy burden on them. The best solution to ensuring that you have a steady stream of income post-retirement is to find a local annuities provider and buy one. With an annuity, you won’t ever have to worry about money again once you have retired.

The Importance of Shopping Around

If you are going to buy an annuity, then it’s crucial that you shop around. A lot of people, unfortunately, do not shop around when they are buying one, which nearly always results in them getting a bad deal. There are a lot of annuity providers to choose from, all offering different packages and different rates. Ideally, you want a package with high annuity rates, meaning that the amount of interest that you earn is high. The higher the rates are, the more money you will earn back.

Getting Financial Advice

Before taking out an annuity, it’s generally a good idea to get some expert financial advice. Taking an annuity out without first getting advice is a bad idea because you may not fully understand what an annuity is and how it works. Another reason that not getting financial advice is a bad idea is that a financial advisor will be able to guide you through the process of buying an annuity, which can be somewhat complex. They may even be able to suggest an annuity provider to you, which makes it easier for you to find one.

Conducting Online Research

If you aren’t going to get professional financial advice, then you need to make sure that you conduct extensive online research. Unfortunately, a lot of people don’t take the time to research annuities online before they buy them, which leads to them making bad decisions. As with any financial product, annuities need to be painstakingly researched and properly understood before they are purchased. There might be better alternatives to annuities for you. Everybody’s situation is different. One of the reasons that a financial advisor’s advice is so useful is because they will be able to recommend alternative solutions to you.

Benefits of Annuities

Annuity Rates

The higher an annuity’s rate is, the more money that you will earn. If an annuity’s rate was 5%, then you would earn $5,000 for every $100,000 deposited. This means that if you deposit around $1,000,000, you can earn enough money to support yourself each year, without working. It’s worth noting that some annuities have higher interest rates than that. The rate that’s used is usually set in stone by financial institutions, so it’s more or less the same across all annuity providers, although it can sometimes be higher than the standard rate depending upon the amount of money that’s being deposited.

Investment Options

When you take out an annuity, you have a broad range of different investment options to choose from. Variable annuities, for example, allow you to invest in bonds, money market instruments, and stocks. The ability to invest in a broad different range of things makes it easier for you to earn a lot of money back on your annuity, increasing the amount of profit that you make. If you are able to increase profits, then your retirement will be a lot more relaxed—you won’t have to spend all of your time worrying about money, instead giving you the chance to do other things like gardening. You should always consider investment options when you are taking out an annuity.

Death Benefit

Something else that’s worth considering is death benefits. When you take out an annuity, you may be able to get on that has death benefits, meaning that if you die, a pay-out is guaranteed to be made to the people that you have designated as your beneficiaries. More often than not, death benefits paid to your beneficiaries don’t have to pass through probate, which means that they are able to get their hands on their inheritance a lot quicker, making their lives much easier. The process of claiming one’s inheritance can be extremely complex and very inconvenient. It’s also very hard for people to contest death benefits, but that’s not the case for wills.

Mandatory Withdrawals

As long as your annuity is not part of an IRA or a retirement plan, then you won’t have to begin taking minimum distributions after the age of 72. Mandatory withdrawals can be a big problem for a lot of people, especially when you consider that some annuities won’t allow people to access their death benefit when they have begun taking withdrawals. Because of this, a lot of people retain the money in their annuity, so that they can give that to their loved ones as their inheritance, rather than having to deal with the typical will process.

Lifetime Payments

Without a doubt, the greatest advantage of an annuity is that you are able to receive lifetime payments, meaning that you don’t ever have to work again. You can retire and will never have to worry about money again, because you will get a guaranteed paycheck at the end of the year or each month, according to your plan. Money is a big concern for a lot of retirees.

An annuity is something that’s definitely worth looking into if you don’t want to have to worry about money again after your retirement. Make sure to shop around, so that you find the deal that’s best for you.