Annuity Buying Advice – Do Your Homework
An annuity can be thought of as a stream of monthly payments for a fixed period of time. The amount of interest that you will pay on your annuity will depend on the value of your investment and the rate of interest at the time of maturity. This type of annuity has the benefit of being tax free and is normally held to maturity, meaning that it will begin to accrue interest at that point. You can also choose to defer your payments and earn interest during your retirement years.
The current and future value of annuities are the present and future values of future payments received from an annuity, either at a predetermined rate or a discount rate. The lower the discount rate, or a fixed rate, the less the future value of your annuities.
Interest that accumulates on your annuities also has a bearing on the future value. The longer you wait until you retire before paying the full amount of your annuities, the more the interest you will owe to the insurance company will increase. If you wait until you are almost retired, you will end up paying more money than the original payment cost you would have paid if you had invested the money earlier. Because you are investing your money early on in your retirement years, you will need to pay out less for your annuities.
There are two types of annuities. The first is the fixed annuities, which may be fixed for one year, two years or indefinitely. The fixed annuities are held to maturity and have a fixed interest rate. While they may have higher interest rates initially, if you wait to make your annuities payments until you are retired, you can enjoy a higher fixed interest rate. The second type is the variable annuities, which may be adjustable, or they can be held until you retire.
While a fixed annuity allows you to make monthly payments, there is a risk that you could lose the value of your annuities. You may start to lose money if you wait to make your annuities payments, and in the worst case scenario you could lose all of your investments. If you fail to make your payments on time, you will need to sell your annuities before you reach a point where you can no longer afford them and will have to start all over. again.
As you can see, there are benefits and risks to each type of annuity and choosing which you will hold depends on your financial situation and circumstances. It may be worth it to purchase an adjustable annuity for an investment that you can easily manage. or you may want to hold your investments until you retire. Once you have made the decision to purchase annuities, you can start planning now to find the best deal for you.