There’s a lot of confusion out there around the subject of annuities. There are insurance companies that still offer this product as a viable source of long-term investment, especially for your retirement age, and then there is a growing noise in the financial sphere about annuities being a “bad investment”. Annuities are basically a scheme of paying a lump sum amount of money upfront to be cashed out in installments later when you need a regular and steady stream of income. This article is going to cut through the myths of what annuities are and aren’t, and give you a clear and concise picture of what an annuity does and whether it can be a good fit for you based on your current and future financial goals.
Are Annuities Non-Refundable?
Short answer? Yes. Once you have paid the premium on your annuity, you cannot ask for a refund. But does that mean that your money is gone for good and nobody else can benefit from it in the event of your death? Not necessarily. This is where getting the help of annuity advisors comes in handy. Depending on the annuity program you have opted for, you will have a few choices. If you’re concerned about dying before making the full use of your annuity payments, you can choose not to go “all in”. You can only invest a part of your accumulated wealth that will give you enough annual payout to take care of your basic living expenses once you have retired. Conversely, you can opt for a guaranteed pay annuity over a fixed period, in which case, even if you die before the period to cash your annuity has elapsed, your beneficiaries can inherit the sum of your annuity. Hiring an annuity advisor can be very helpful when choosing the right annuity that can assure a return on your investment.
Are Annuities Only for Retirees?
While this type of investment is usually popular among older individuals looking to secure their retirement period, who says that it is only possible to retire in old age? More and more young people are choosing to work hard and invest smartly in their earlier years to be able to enjoy an early retirement. If you’re one of such individuals, consider speaking to an annuity advisor about the possibility of setting up an annuity with a portion of your wealth. It can help you keep a steady stream of income throughout your retirement period and support your goals, such as travelling across the world. The best combination would be investing in an annuity as well as a pension fund that can start at a certain age. In such a case, an annuity can help you quit your full-time job a lot sooner and provide support until your pension funds kick in.
Are Annuities Complex?
Without a shadow of doubt, most of the investment modalities available in the market are complex, and almost all of them require thorough research before you decide to invest a huge chunk of your money. Just because annuities are structured in a complex manner does not mean you have to shy away from them. You can always ask an annuity advisor about the structures of payments and charges of annuities, and the possible return that can be obtained on this type of investment. You don’t even need to hire and keep a full-time financial advisor; all you need is a few consultations at most before you sign your contract or let your advisor find the right type of annuity for you after explaining your financial goals. Once your advisor has given you all the information about your annuity contract, you’re golden. You get to enjoy retirement with annual payouts to meet your expenses without lifting a finger.
Are Annuities Expensive?
Annuities are notorious for being one of the most expensive investment programs. Many of the fixed annuities come with minimal upfront charges. At the same time, there are hidden costs in the companies’ policies that come to light afterwards. An advisor can do the due diligence on your behalf and give you a clear idea of what sort of charges you can expect. But bear in mind that annuities charge so much to provide you with a guaranteed outcome. It means you get your fixed income regardless of how the market temperature fluctuates.
Are Annuities Boring and Old-School?
Technically, yes. Annuities are designed in such a manner that they can be a long, boring process that is highly predictable, and you can’t really expect to win a jackpot from them. And yes, there are retirement solutions out there that provide more substantial growth. But these innovative means of making money also come with their fair share of risks. Depending on your investment and the advice of your annuity advisor, you should make a decision based on what would work better for you based on your goals, age and financial wealth. If your goal is to live a peaceful and predictable life, annuities might be the best answer for you.
Conclusion
Annuities are boring and predictable and maybe a little expensive, but that’s what makes them a great solution for people who want a dependable source of income. With the right annuity advisor by your side, you might be able to find just the right annuity program that can secure your finances for the rest of your life.
