subject: Fixed Annuities To Fix Your Old Age [print this page] You will be surprised to know that not many young people really bothered about their future income prospects and savings. Their common take on life is to enjoy life first and worry later. But wouldn't it be too late that after the spending spree, you realized that you are left with little to supplement your income through your old age. Can you imagine yourself continue working while your peers are comfortably enjoying their retirement?
This is where fixed annuities come in. Asked those who have retired and they will tell you how their annuities plans have come to be their life-line to a worry-free and comfortable living in their golden years. There are no hand-outs to depend on but they live proudly as independent individuals.
Are you curious yet about what is an annuity? To explain it in the simplest term, an annuity is an investment product that has an insurance component and it is backed by the financial strength of the insurance company. An annuity offers you a measure of protection against the market volatilities with guaranteed investment returns. It is actually a form of asset accumulation with a tax-deferred growth.
So what about fixed annuities? Can it be a fix for your old age? A fixed annuity is a kind of annuity plan with a fixed rate of interest. This option allows you the ease to calculate the fixed rate of return from your investment. You earn a fixed income where your principal amount remains unchanged throughout the entire tenure of the plan as it accumulates the interests over time. Its advantage outweighs the least favorable in terms of stability as even if the interest rates fall in the market, you will still receive the same fixed rates for your investment. Unfortunately, should the market interest rates go up, you will not be able to benefit from it.
However, fixed annuities receive the most acceptances because the risk factors are almost zero and that is what most people are looking for. Some of other advantages of this annuity plan include;
A tax-deferred income if you are looking at it for your golden years. As you investment continues to accumulate the interests, you do not have to pay any tax on the sum until you start withdrawing the money from your account.
Generally the interest rate offered for fixed annuities are more competitive and are usually deemed to be better than investing in a bank CD. The longer you keep waiting for the maturity, the higher the yield when you withdraw.
Some insurance companies do offer bonus rates to their investors at the end of their investment tenure. You get to enjoy the extra interests on top of your contractual interests which mean an additional boost to your principal amount.
There is no penalty for withdrawals. Most have a provision that allows you to withdraw up to a certain amount annually without any penalty fees.
If you are still confused by what is an annuity, then it is high time you engage the services of an annuity specialist to help you plan for your old age. Remember, you are never too young to start on one.
