Annuities have become increasingly more popular as of late and there are several reasons as to why consumers are finding it more beneficial to invest in this particular investment strategy, especially when considering retirement years. Retirement is meant to be a time marked by stability and security. Annuities have shown to be able to provide consumers with these qualities.
An annuity gives the consumer a guaranteed income for life after retirement. The consumer can use a lump sum from their pension or from their savings to purchase an annuity, allowing them to secure a stable income and stable financial life after they’ve stopped working. There are several options for annuity purchases and there are several insurers to consider when shopping around for an annuity. The definition of annuities includes the idea that is meant to allow for a stable and secure financial future during retirement. Given that level of importance, it is crucial for consumers to consider all options and all potential avenues when choosing the right annuity.
Annuities have become popular for a few different reasons, the first of which is that the government has made their purchase compulsory. The second reason for their surge in popularity is the idea that annuities allow for a stable income throughout retirement. While they do not pose a chance at gaining a large return on investment like strategies that work on the fluctuation of the markets, such as stocks, they do allow for a guaranteed income. This guarantee is rarely found in investment portfolios. They pose a pretty low risk to financial security and consumers seem to gravitate toward that low risk when it comes to their retirement years.
Annuities have also become popular because they come with a variety of different options. For many the idea of a reliable source of income throughout retirement is too hard to pass up and consumers are using annuities as a solid source of income in their retirement portfolios. Consumers can choose from fixed, variable, and immediate annuities. This means that through research, the investor is likely to find an annuity that will work for their future goals. Through research, investors are also able to choose an investor that proves to have the plans they will work best for them. Because of the open market in the current financial industry, consumers are able to find both the annuity and the investor that will serve to fit their needs best.
Many consumers approaching their retirement years, if not most of them, choose to at least look in to the possibility of investing in an annuity to help fund their lifestyle once they have stopped working. For those who do decide upon purchasing an annuity, there are several different options available. Not only are there a variety of different types of annuities but there are also several enhancements and add-ons that can be attached to certain annuities. For many consumers, the sheer number of options available can make choosing an annuity incredibly challenging. This is why each consumer should consult with an independent financial adviser. Many consumers are missing out on several enhancements available to them, including enhanced life annuities, because they do not have all of the information necessary to help them make educated decisions on how they will fund their retirement years.
Enhanced annuities allow consumers to receive higher levels of income if they have certain life threatening medical conditions. These enhanced annuities operate under the premise that the insurer can pay out higher levels of income to these consumers because it is assumed that the medical condition(s) in question will shorten the life expectancy of the consumer. This allows the consumer to pay out for a much shorter period of time.
There are several advantages to investing in an enhanced life annuities, the first of which is the higher payout. Depending on the medical or health condition, consumers can receive up to 40% more than they would with other annuity purchases. The enhanced life annuity is not subject to fluctuations based on the markets or other investment conditions. Consumers do not have to partake in any regular or ongoing medication conditions. Therefore, consumers do not have to worry about their income decreasing if their health condition improves. Knowing exactly how much money will be received and knowing that it is guaranteed and will never decrease allows the consumer to budget for their future. This budgeting can be for every day or every month expenses or it can be to anticipate a large life purchase or to pay down debt.
There are very few disadvantages to purchasing an enhanced life annuity. The first of these is that the consumer must explain their applicable medical and health conditions. Therefore, there is far more personal disclosure necessary to purchase an enhance life annuity than is the case for a standard annuity. The only other disadvantages associated with an enhanced life annuity are those that are associated with all annuities. These include that annuity payments may not keep up with the increased cost of living. It is also impossible for a consumer to vary their income payments once they have already agreed upon the annuity logistics. For any consumer who has a very short life expectancy, it may be better for them to invest in another form of retirement investment such as enhanced equity release, income drawdown, phased drawdown, and phased retirement. This would better equip the consumer to maximize all of their death benefits while receiving the highest level of income possible for their unique situation.
No matter what the choice by the consumer, consulting with an independent financial adviser should be the first action taken when deciding how to invest in retirement. With so many options available, many consumers are ill-equipped to make the right decision for their personal situation. Secondly, they may not even know all of the options available to them. That accounts for why so many consumers are inadvertently bypassing the possibility of qualifying for an enhanced annuity.