Many people invest in stocks, bonds and retirement accounts, but understanding annuities can also help with your investment needs. Unfortunately, most people are not familiar with the basics regarding this investment option. By answering these common questions everyone always asks, you will understand if investing in an annuity is right for your needs.
What Exactly is an Annuity?
While shocking to hear, most people who are interested in making investments have never heard of annuity. Thankfully, it is easily explained.
Annuities are actually investable insurance products. Once you invest in an annuity, you are able to receive payments monthly, quarterly or annually. It is a great option for investors who want a steady income during their retirement.
Which Annuity is Right for You?
You can invest in a deferred or immediate annuity, so understanding the differences will help you determine which option is right for you.
You can invest in a deferred annuity before you plan on receiving payments. Investing in the deferred option allows you to accumulate money while the annuity generates income, allowing you to start receiving larger payouts during your retirement.
Choosing an immediate annuity ensures you are able to begin receiving payouts as soon as you make the initial investment.
Once you decide which type of annuity you prefer, you will need to choose either a fixed or variable interest rate. A fixed annuity guarantees interest rates, similar to a traditional bank CD. However, a variable annuity will pay an interest rate based on your specific investments.
Are There Tax Benefits to Investing in an Annuity?
When you decide to invest in an annuity, your income will grow tax-deferred. Once you begin making withdrawals, you will not need to pay taxes on the amount invested. It is important to note that your earnings will be taxed at the rate decided upon at purchase.
The tax benefits are a large selling-point of investing in an annuity, but there are other advantages to consider, as well.
With a 401K program or an IRA, there is a cap on how much you are able to contribute, but there is no limit on how much you can contribute or earn with an annuity. Because there is no limit, you will be able to save a larger amount of money in a shorter period of time. This makes an annuity a smarter investment for individuals closer to their retirement age.
Investing does not have to be terribly complicated. To learn more about annuities, contact Jason Graziani in the Frisco, TX, area by calling (972) 992-1920.
Jason Graziani | Annuities Frisco TX | (972) 992-1920