Annuities can give individuals peace of mind when it comes to preparing for their retirement or long term challenges they might face. A head of a household may consider an Annuity schedule of taking care of their family if they are no longer able to.
Life insurance companies are responsible for issuing Annuity contracts. The Annuity contract is created when an individual provides a life insurance company with the financial resources to be invested on a tax-deferred basis and then paid back to the owner in several ways, usually on a predetermined payment schedule. This legal agreement provides a guaranteed payment until the death of the people named in the contract.
Basically, investors and insurance companies have a contract where the investor makes a lump-sum payment or agrees to make a series of payments. Then, the insurer will make payments back to an investor either in a lump-sum amount or on a payment schedule. Annuities offer an option for tax-deferred growth and may also include a death benefit.
Annuities can be either fixed (where the insurance companies guarantees a minimum rate of return while your account is growing) or variable (where the rate of return fluctuates when based on the different investment options you can choose from). The Securities and Exchange Commission regulates variable annuities but not fixed annuities.
Since the average person's life span is increasing well beyond their retirement age, an Annuity contract can help investors have income and not outlive their investments. Annuities are another variety of investment consumers can choose from when diversifying their portfolio. This type of investment can be especially helpful when it comes to individuals planning for their retirement. Annuity investments may become extremely popular if the push for privatizing Social Security comes to fruition. By combining an Annuity with Social Security, employer pensions, 401(k) plans, IRAs and other assets one can have a stable retirement.
