Economic downturns can hit us like a bolt from the blue – one moment we have a fairly decent retirement portfolio and the next instant, we have barely enough to survive! For many of us who scarcely have any savings worth speaking of when we retire; a volatile market will kill all dreams of having a comfortable retirement lifestyle. Many retired people end up taking small paying jobs to survive and the constant fear of running out of money can be extremely wearying.
How Can Immediate Annuities Help To Guarantee Retirement Income For You?
Immediate annuities as the name suggests commences payment to the depositor or beneficiary immediately. With this type of annuity you get a guaranteed monthly payment for the rest of your life. You can buy this product even at the age of 90; so it is an option available to anyone who wishes to get a regular guaranteed payment every month.
Immediate annuities work like fixed annuities – these insurance policies fetch you a guaranteed percentage annually and help to build you a larger cash base. You pay one amount and purchase immediate annuity; your payments start within 7 days to 1 year from the date of activation of the policy. You are free to choose when you want the payments to start inside of this time frame. Once you settle on the date the payments will be made to you regularly like clockwork, every month for the rest of your life. Payments may be taxed as regular income.
The Advantages of Immediate Annuities Include:
1. Your insurance agent will be able to tell you exactly how much you will get as a monthly payment; the amount is calculated on the size of your lump sum deposit.
2. Safety – immediate annuity is an insurance product which is backed by the assets and financial security of the insurance company. Hence, it is recommended that you do your research well to find a rock solid insurance company to invest with.
3. Security – one of the main benefits is the peace of mind this type of insurance product affords the beneficiary. You are assured of your monthly income for the rest of your life irrespective of all else. You also have the option to add an inflation rider to the policy to ensure increased payments in tandem with increased inflation.
4. Hassle free – immediate annuities are not mutual funds or stocks or bonds. As such you do not have to sit and worry about the rollercoaster ride the stock markets take every so often. You know that every month your money will be in the bank.
– No fees – with immediate annuities you benefit from the lack of management, setup, administrative and annual fees that need to be paid out for other types of investments.
– You have a tax advantage if you spread your tax liability over several years; this will help you lower your annual tax payments. This can be done if you have funded your immediate annuity with pretax dollars. Alternatively, if you fund your annuity with after tax dollars, only part of each payment is made up of interest and hence taxable. The remainder of the payment is taken as a return of your principle and hence not taxable.
To summarize, immediate annuity is an insurance product that will provide the beneficiary with a steady monthly income for the rest of his or her life. The monetary benefits paid out by the policy are dependent on various factors including the amount of single premium payment, gender and age.