Monthly Archives: February 2014

The Two Types of Annuities Simplified

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There are several investment strategies for ensuring that retirement is a time that is as free from stress and as financially stable as possible. One of the most popularly used of these strategies is investing in an annuity, which can guarantee a certain level of income for a designated period of time. There are a variety of different Types of Annuities, each with their own benefits and drawbacks. Choosing the right annuity can be a large investment of time and effort.
However, researching and ultimately choosing the best annuity for each individual’s unique financial situation can prove to be incredibly cost effective and lucrative.

Any annuity is a way in which an investor can plan for their retirement years, transforming part of their pension pot into a long term financial solution to be used during their retirement. However, choosing the right annuity can make all the difference when trying to plan for years spent in retirement.

Lifetime Annuities
A lifetime annuity is a way for those planning for retirement to use part of their pension pot to guarantee a certain level of income for the rest of their life. With this type of annuity, the investor is guaranteed a determined level of income for the remainder of their life, however long that may be. However, there is obviously no way to predict the lifetime of the investor. So there is no real way to know how long the payments will last. With this type of annuity, the payments stay constant, which means that they may actually end up losing value, depending upon inflation. There is no real way to increase income or payout with this form of an annuity. However, one positive aspect of this type of annuity is that the investor can always plan to have that designated amount of money, as it is guaranteed for the lifetime of the investor.

Variable Annuities
Variable annuities can sometimes be accompanied by great risk. However, they can also produce great reward. With this type of annuity, there is a much greater opportunity for asset growth, given that there are a range of investment choices available. The value of the investment differs depending on the investment options that are chosen. The investment options typically include mutual funds that invest in bonds, money market instruments, stock, or a combination of the three.

Those who choose this annuity strategy are those who are really looking to grow their asset and investment. However, for those who invest in variable annuities, it is crucial to keep in mind that that asset can be compromised. There is both opportunity for growth as well as opportunity for loss.

The Meaningful Definition of Annuities

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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.