By William Jed Mayfield The Best Practices Used to Create Sustainable Streams of Retirement Income Do you want the best retirement income solutions in 2017? Do you want to find the right answers for creating a secure retirement, never fearing market volatility again with that part of your portfolio that is necessary for sustaining your Read more >>
Here are the four steps for buying an annuity.
Some annuity products may fit your goals better others. Why? Annuity products are designed for a specific purpose and aligning them with your personal goals is essential. In general, the decision on whether an annuity is right for your depends on your needs and goals.
The number one reason that people purchase an annuity in the first place is income protection, protection from living too long. Think of it as an insurance to protect you from outliving your assets. It is not uncommon, and it is becoming more common, for people to outlive their retirement funds, people are living longer. For many people, it just makes solid sense. With the purchase of an annuity come contractual benefits known as settlement options.
In the United States annuities were first used by The Presbyterian Ministers Association as a retirement income for older ministers and their families. These annuities were funded by the church and were allowed to pass from the head of the household to a surviving spouse. These early vehicles were the foundation for future widows and orphans benefits.
Each month, millions of dollars are being moved from stocks, bonds, mutual funds, variable annuities, ETFs, 401(k)s, and CDs into Fixed Indexed Annuities. Why? The number 1 reason is SAFETY. But How safe is Your Fixed Indexed Annuity – are you sure it will provide you with enough income to last as long as you live? Should you trust an indexed annuity with your important retirement funds? What happens if an insurance company were to fail? These and other questions are vitally important and the answers may surprise you.
The feature separating equity index annuities from standard interest bearing annuities is how the account’s interest is credited. Indexed fixed annuities normally offer a minimum guaranteed interest rate combined with an interest rate linked to a market index such as the Standard and Poor’s 500 or the Dow Jones Industrial Average. Because of the equity index annuity’s guaranteed interest rate, fixed equity indexed annuities have no market risk other than the expected interest credited to the annuity, which is determined by the outside source.
While dollar cost averaging does not by itself shield investors from market downturns, continuous and scheduled purchases over an extended period of time tend to cancel out the ups and downs of the market, and leave the investor with a net gain and a minimized risk. A variable annuity is more suited for taking advantage of dollar cost averaging because it allows for a specific portion of your annuity investment to be transferred tax free on a monthly into equity portfolios.
Today, an indexed annuity is an investment product sold by insurance companies. Indexed annuities can be purchased through a series of contributions or in one lump sum. The money put into the fixed indexed annuity contract is allowed to grow for a period of time. Then, at a future date, the contract becomes a fixed index annuity income through periodic payments over a specified period of time or for a lifetime.
Purchasing an annuity can be a great way to guarantee your retirement income for as long as you live. It can also protect your assets from inflation, stock market fluctuations, a serious medical crisis or other unforeseen circumstances. An annuity can help bolster your retirement financial plan by guaranteeing your retirement income. Think of an annuity like a pension you might purchase. You pay a lump sum or payments over time. In return you receive monthly income for a specified period of time or for the rest of your life – no matter how long you live.