Saturday, February 23, 2019

5 Questions to Ask Before Investing in a Retirement Annuity

Are you planning to invest in a retirement annuity? Ask these five important questions before you choose a plan.

Investing in an annuity as part of the retirement strategy is a smart investment for people approaching their retirement. More than anything else, they offer the assurance that a retiree will always have the much-needed fund even during the time when (s) he outlives the savings. However, deciding on the type of annuity is not quite simple. If you are considering opting for an annuity program to secure your retirement years, ask yourself the following five most important questions before making a selection:

1. Which Annuity Should I Choose?

There are different types of retirement annuities such as fixed indexed and variable, immediate and deferred, and fixed period and lifetime. While immediate annuities pay you right away, a deferred annuity payback will not start until a specified period. A fixed indexed annuity (FIA) is a reliable option as it promises guaranteed lifetime income just as an immediate annuity. However, FIAs help you receive a fixed rate of interest over a given period and offer a principal guarantee. FIAs provide you an opportunity to benefit from stock options, and unlike variable annuities, the principal amount is safe, and you never run the risk of losing your money when the stock market is volatile. Moreover, FIAs being governed by a rate cap and a rate floor, they are a safer bet compared to a variable annuity.

2. What Monthly Income Can I Expect from an Annuity?

Your monthly income from an annuity depends on a host of factors such as your age, the state you live in, gender, what insurance companies are quoting for their products, and what amount you have invested in an annuity. It is important to note here that different annuity sellers quote different prices for similar products with almost the same benefits. So you need to research on annuity providers, their products, and compare prices before you choose the right one. How much monthly income you receive also depends on the kind of annuity you buy and the benefits associated with them like guaranteed protection of the principal amount and assets.

3. What Features Should I Look for Before Buying an Annuity?

When shopping for annuities, do not hesitate to ask questions about the features associated with the product. Would you like the payments to be adjusted for inflation? It is a wise choice if you want the payments to continue for decades. Would you like the payouts to end once you are no more or would you want to choose an annuity income with a minimum total benefit that you and your legates or inheritors receive? Do you want to opt for a retirement annuity just for you for life or your partner or next of kin?

4. What Proportion of Assets Must I Use to Invest in Annuities?

How much assets you will use to buy an annuity depends on your financial state. You should always consult with an experienced retirement planner or a reputed insurance company while assessing the benefits of annuities. We recommend that you keep at least 40 percent of your retirement assets for an emergency. Since most of the annuities provide you with a stable income over the years, they’re not ideally designed to meet unanticipated expenses.

5. Can I Invest in an Annuity with Inflation Protection?

Yes, you can because most of the reputed annuity sellers provide you with an automatic cost-of-living-adjustment (COLA), which comes as a standard feature. With COLA, your retirement income is protected against inflation.

Take your time before you choose a retirement annuity plan that provides you with a stable income during your golden years. Learn about the different plans, ask questions, and invest in the one that fulfills your needs. Make an informed decision and be confident when opting for an annuity.

About the Writer

Olivia writes about business, technology and lifestyle for leading websites and print media. When not writing or editing, she is at her desk, penning her novel.
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