Annuities Explained – Investing for Beginners
Not everybody is interested about investments and insurances but for those who want to have a more stable financial condition cone retirement age, it is vital to have a detailed understanding on what annuities are. Here we aim to annuities explained in the most effective and simple manner. While it is important to understand the complexities and mathematics of annuities, consumers needs to have annuities explained in a more simplistic manner in order to help them become more aware of what their options are, what is at stake and what they can do to make better decisions.
Now, let us have annuities explained. To simply put it, annuities are agreements between consumers and insurance companies (or other financial institutions). These annuities carry some features like with life insurance policies as well as investment products. The client will pay the insurance company for an annuity account for a certain amount either in lump sum or in several periods of time. Then, when the person reaches his retirement age, the company will start rolling in payments to the client at a specified amount, over a specified period of time. Let us further have annuities explained to understand your options as a consumer.
First, let’s have fixed annuities explained. This kind of annuity lacks that aspect of liquidity. This means the money does not flow easily and you cannot get money from your fund when you need it. If you need it now, but it is not the time for the money to be released, hefty fines will be applied. Annuities are often paid when you reach 59 ½
Second let’s have variable annuities explained. These differ from the prior type since the payments that you make can be invested form a selection of investment products so if you want bonds, or mutual funds, you have your choice. However, the interest rates and growth factors are not fixed so if the rates are low, then the growth of your investments can get lower as well.
Finally, let us have indexed annuities explained. These are annuities that are a mixture between the fixed and variable types. These annuities offer the guarantees of fixed annuities but there is also a promise of higher returns as with variable types. A small portion of your money is invested on index options and that means the money will not go anywhere even if the index goes down. Also, the indexed annuities allow the funds to become tax deferred as they grow.
There are so many things to learn about annuities and while it is necessary to have annuities explained by experts for detailed information, consumers also have to consider some practical aspects of finding the right annuity. It is not that much finding the perfect product, but more practically, finding the right company who has the financial stability that you can rely on. While it is possible for money to be guaranteed, if the insurance company is not financially stable, how are you going to enjoy the benefits of these funds? Let us help you find the best options. Select your state and receive estimates from top insurance companies in your area.