Common Questions Asked About Annuities
Have you maxed out your 401(k) plans and individual retirement account (IRA)? If you’ve used up these tax-advantaged retirement investment vehicles, perhaps it’s time for you to ask an investment management advisor about annuity payments. This is a great option for someone who has extra money to set aside for retirement.
What Exactly Is an Annuity?
An annuity is a contract between an insurance company and yourself. In return for your series of payments or a lump-sum payment, you’ll be entitled to receive disbursements regularly. These disbursements may begin right away or in the future.
What Are the Two Categories of Annuity?
Immediate Payment Annuity
When you buy an immediate payment annuity or a single-premium immediate annuity (SPIA), you make a lump-sum payment to an insurance company. In turn, the insurance company pays you, the annuitant, a guaranteed regular income for a limited period or for the rest of your life, depending on the terms of the contract. The insurer calculates the amount of these disbursements based on specific factors that include your age, prevailing interest rates, and the length of time these payments continue.
In most cases, the payments begin almost immediately or within the month of your purchase. In addition, you’ll get to decide on the “mode” or how often you want to be paid. You may choose to be paid on a monthly, quarterly, and annual basis.
Most investors who decide to buy deferred annuity are looking to supplement their Social Security or other retirement income. This contract option would require you to invest your money in a series of payments or a lump sum and watch your investment grow over time. The earnings on your contribution are tax-deferred until you start taking a regular income or a withdrawal.
With a deferred annuity, the insurance company promises to pay you a lump sum or a regular income at a future date. As the annuitant, you’ll get to choose when the payments begin.
Are You Looking for An Investment Management Advisor?
If you feel your personal objectives have changed more than your investment strategy, schedule an appointment with the team of money managers at 1879 Advisors today.