In the U.S. News & World Report article, “Do You Need an Annuity?,” Phil Taylor goes through the benefits of annuity products in retirement. Annuities came about to ensure that retirees do not outlive their savings. Because of their low risk, fixed annuities are a conservative investment popular with retirees because of their tax-deferral benefits, exemption from creditors, and avoidance of probate through death benefits. Their penalty for early withdrawal is usually gone after less than ten years and there is usually no limit to the amount of contributions you can make.
The article describes how you receive monthly income payments from an insurance company in exchange for either a lump sum initial payment or several installments. The amount you’ll be paid out is predetermined whether the amount paid in is more or less that the payout you’ll get. The payout options are detailed as follows. If you choose straight life, you’ll get monthly payments for as you long as you live, but nothing will be passed on to your heirs. If you choose life with period certain, death benefits will be paid to your heirs to make up for any money you paid into the annuity that has yet to be paid back. There is also the choice of joint life for you and a spouse or joint life with period certain where your heirs would receive death benefits just like the above mentioned annuity.
With a systematic withdrawal, your payments will be fixed and will come to you either monthly, quarterly, or yearly. Finally, you can get a lump sum annuity payment at a date in the future. Fixed annuities are a great option for retirees, especially those who don’t have traditional pensions or multiple sources of monthly income like Social Security. Speak with an expert for more information and to see if an annuity will work for your retirement.
Written by Rachel Summit
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