1 Annuity for Retirement Income: type of pension
The thought of having to live your remaining years with little or no income can be scary. Given the fact that most retirees don’t have the luxury of living off a pension and instead have to rely on their savings, it is important that they invest wisely so that their money doesn’t run out. As there is no way to calculate the number of years you are going to live after you retire, there is always the risk that you may end up outliving your money. Fortunately, you have life annuities to provide you a guaranteed monthly income for life.
Annuities ensure you’ll never run out of income.
Life annuities can be purchased on a single life or on a “joint” life. The joint-life annuity would provide a guaranteed income for the lifetime of both individuals.
Many people, looking for financial security, will naturally gravitate to a joint annuity. After all, no one wants to leave the spouse without an income. But understand that this has shortcomings.
A single-life annuity pays a given amount based on one lifetime. Since the joint annuity has to pay for two lifetimes, the size of the payment will be smaller, depending on the amount guaranteed to the survivor. Simplistically, say a single-life annuity would pay $700 per month to one person. The joint-and-one-half annuity might pay $600 per month and the joint and two-thirds $500 per month.
Better to opt for a single-life annuity and buy a separate life insurance policy to look out for the survivor.
It would be unwise, however, to commit all of your savings to a life annuity. Why? Because a life annuity is an exchange of one sum, that $100,000, for a lifetime of fixed payments — you can’t get your original investment back.
Why would anyone want to tie up money in an annuity rather than just leaving it available for periodic withdrawals?
Because it gives a person an income that cannot be outlived. Periodic withdrawals could be too large too soon, causing a person to run out of money early. Or they could be too small for fear of running out of money such that the person is not able to enjoy the funds set aside for retirement.
How can I compare annuity rates?
Part of the reason why annuities have limited popularity is that it’s extremely difficult to compare payouts from various insurers. It is better you contact a Financial Advisor to check what rates Insurance Companies offer.
Where can I buy Annuities?
The best option will be through an Independent Financial Advisor that works with various insurance companies and shop among them the best annuity for your particular situation.
If you need help to see if a life annuity is for you please contact us at info@mintcofinancial.com or call us at 813 964 7100/ 716 565 1300 we are independent financial advisors and also fee only Financial Avisors.
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