Annuities as an Investment Option
Your retirement may be decades away but it’s important to start saving and investing now. Consider annuities, a retirement funding strategy that was often neglected in the face of a boom economy. Now, however, the stability of an annuity often looks just as appealing as other retirement funding options. Here are some basic facts to help you decide whether an annuity might be right for you:
- An annuity is a tax-deferred investment contract. You invest your money (either a lump sum or a series of contributions) with a company that sells annuities, such as life insurance and mutual fund companies and banks. In exchange for your investment, the annuity issuer promises to make payments to you or a named beneficiary at certain points in the future.
- Rates of return and costs can vary widely between different annuities, so shop around! You'll also want to shop around for a reputable, financially sound annuity issuer. There are firms that make a business of rating insurance companies based on their financial strength, investment performance, and other factors.
- Payout options, also known as annuitization options, differ based on how you’ve elected to spread payments over the coming years. The amount of each payment depends on such factors as the amount of your principal investment, the particular type of annuity, the length of the payout period and your age if you elect for
lifetime payments.
Annuities may be a good option to explore if you’re looking for investment options outside the stock market. As with any investment, remember to research and educate yourself before making any decisions. For more information visit the Retirement Planning section of the 360 Financial Literacy website.
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