Depending on your needs, you are bound to stash money in various derivatives, and the most popular has to be annuities leave alone your bank account earning meager interest. An annuity is a lump sum of cash invested that will give you a fixed monthly income either for life, or for a certain period. There are immediate annuities that offer the income immediately or deferred annuities that give you access to your money after an agreed time in the future. The funds you invest are not insured and the amount you get back depends on whether the annuity is variable or fixed.
When searching for an annuity, you have to be wary of the personal selling annuities since the rosy language may lure you into investing in an annuity that is not right for you. When you get your Social Security number, you are immediately enrolled in a lifetime income annuity an example is your pension. However, there is the good such as the ability to sell an annuity payment for quick cash, the bad, and the outright ugly things about annuities.
Indexed Annuity
This is a special class of annuity and the returns are yielded from contributions based on a specified equity-based indexed agreed upon when signing the annuity contract. An indexed annuity offers the opportunity the chance to earn higher returns based on performance of the bourse and it usually has a protection against market declines. However, the returns are not always appealing since the index sets the cap, which means no matter how well the stock market is performing, you will get the rate agreed at the very beginning. So get a professional to advise you on an indexed annuity.
The Good and the Bad of Lifetime Income Annuity
A variable annuity or low cost fixed annuity makes better sense if you have a lump sum that you want to convert into a stream of regular income. However, anyone selling annuities ought to advise you that you will have to tie down tour money for a long period. If you are concerned about outliving your assets, it is better to have a lifetime income annuity, otherwise known as a deferred annuity. You will start receiving your income stream after attaining a certain age. Should you pass on before the agreed age, your dependents and the next of kin will receive the principal amount invested at the beginning.
The downside to a deferred annuity is that you might forfeit the entire amount of the annuity should you pass on after you begin to get the income. Therefore, this ought to be a question you have to pose to companies offering annuities. You can also decide to invest in charitable annuities, where you can donate to a charity of your choice and you will receive a part of the donation added to your monthly check.
Need Quick Cash, Sell the Annuity Payment
Variable annuities attract annual fees of between 3 and 4% and while the amount may not seem huge, cumulatively it is a lot of money when you take into consideration the term of the annuity. If possible, when buying annuities, get a second or third opinion from someone who understands annuities and not necessarily people selling annuities. However, when you need cash for an emergency, you can approach a professional to help you sell the annuity payment. It does not have to be the entire payments, maybe a few years’ worths of payments.