Why Should I Purchase A Fixed Annuity?
Why Should I Purchase A Fixed Annuity? The guaranteed rate of return is an attractive point for those who dislike taking risks with their money.
When Asking your self the question “Why Should I Purchase A Fixed Annuity?”, you need to understand what fixed annuities are, and how they can help you plan for your future.
What is a fixed annuity? -
A fixed annuity is a contract between you and an insurance company. In exchange for a monetary gain in the future, you give the insurance company your money now. It is like a life insurance policy. The life insurance policy protects you, or rather your family, against your premature death, and the annuity protects you from premature poverty. These investments are tax-deferred, meaning that this money is not taxed until you begin receiving the payout. If you decide to fund your annuity with post tax funds, that portion will not be taxed at the time of payout. These are considered to be very safe investments due to the guaranteed rate of return. Asking the question “Why Should I Purchase A Fixed Annuity?”, the obvious answer is because this kind of annuity has a steady rate of growth that is guaranteed. There is not the potential for a very large return as there is with more risky annuities, but such is the price of safety.
How do fixed annuities work? -
Your payments to your annuity earns a guaranteed interest rate for a predetermined period of time. At the end of that time, based on interest rates that are current at that time, a new fixed rate will be put into effect. You can choose one of two payout options.
1.Payout for a fixed period, such as ten years. This means that you will receive payments for ten years, or
2.Payout can be annuitized. This means that you will receive a payment until death.
Ultimately, a annuitized fixed annuity can protect you from poverty due to longevity.
It is for this reason that so many people choose to purchase a fixed annuity.
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