Benefits of Annuities for Retirement
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Recent studies show that individuals today are living longer and retiring earlier. But most do not have the financial assets needed for a comfortable and enjoyable retirement. With disappearing pension plans, the uncertainty of social security benefits and the current state of the U.S. economy, we need to explore other methods of saving money for retirement. An annuity could be an excellent way to supplement your income.
Annuity products are sold by financial companies. The company accepts payments from an individual and grows their money. At a specified time in the future, the money is returned to the individual. There are various types of annuities and most companies put their own spin on these products. Some have life insurance features and some promise impressive amounts. The plans offering a guaranteed payment amount are less risky but more costly.
As with any financial product, it’s recommended that you research the options before making a decision. Consult professionals and compare plans. Variable annuity products are highly recommended because they have several types of guarantees. If you’re thinking about purchasing this type of annuity, it will be helpful to understand the following terms:
Guaranteed Death Benefit: If you die before you draw any benefits, your beneficiary receives a death benefit. Normally this is the amount that has been paid into the plan or the contracts value on the most recent anniversary.
Guaranteed Earning Increase Death Benefit: This benefit has a cost of living feature. In the event of your death, the amount paid to your beneficiary increases each year.
Guaranteed Minimum Income Benefit: This benefit guarantees a minimum payment when the annuity is annuitized, regardless of how the investment performs. Usually you are required to own the annuity for a certain time period before this benefit takes effect.
Guaranteed Minimum Withdrawal Benefit: You can withdraw a certain amount of your total investment each year for a set amount of time, regardless of how the investment performs.
Guaranteed Lifetime Withdrawal Benefit: You can withdraw a minimum amount during your lifetime, regardless of how the investment performs. You don’t have to annuitize your contract.
Guaranteed Minimum Accumulation Benefit: You protect your principal by locking in growth or accepting the company’s guaranteed return during a set time period. At the end of this time, the value will be either the contracts value or the Guaranteed Minimum Accumulation Benefit, whichever is greater.
With all the choices available, the annuity is a viable option to consider when planning your financial future.
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