Is An Annuity Right For You?

Aging baby boomers have reason to worry about whether or not they'll outlive their money, especially in light of the recent global financial crisis. Many are now looking for safer places to put their hard earned funds, where they can have a guaranteed monthly income to supplement Social Security, other investments, and savings. Is an annuity right for you? Here are some reasons why you may or may not want to look into annuities further.

In a nutshell, an annuity is a retirement savings program whereby the annuitant enters into a contract with either an insurance company or a bank; the payments made by the annuitant to the issuing party are paid back either in monthly payments or as a lump sum at a later date, usually when the annuitant retires. The money put into an annuity may earn interest at a set rate (fixed account) or an annuitant may choose a variable rate option with potentially higher returns on investment than with the fixed account.

The main difference between an annuity and an IRA is that there is no limit on the yearly amount of premiums over time or one-time lump sum an annuitant may pay into the account. In other words, where an IRA has a $3,000 yearly contribution limit, an IRA has none. Many people like the security and reliability of receiving a monthly payout once retirement comes: annuities can provide great peace of mind.

If you'd like to start building an annuity at a young age (before age 40, for instance), you will definitely want to consider getting a deferred annuity. The bulk money can be paid in a lump sum, but most young savers choose to pay premiums over time. Earnings over the years are tax-deferred, which make them an extremely attractive savings option. Taxes on income made over and above the original investment amount are not applied until the designated withdrawal date.

For these nearing retirement age, an immediate annuity may be a much better choice than a deferred one because the monthly payouts begin as soon as the annuity is set up. The payment into an immediate annuity is almost always done in a lump sum. An immediate annuity is great for retirees who worry about outliving their savings and whose retirement plans will not generate enough of a monthly income to cover expenses. An annuity payout may also continue after the annuitant's death in order to guarantee income to a surviving spouse.

Make sure to consult with a reputable insurance agent to make sure an annuity is the right choice for you. There are annual fees associated with maintaining an annuity just as there are with other investment plans, so it would be wise to determine if the returns are enough to compensate for the cost of the fees. Annuities offer peace of mind and greater security: those gifts are priceless.

Article Source: http://articlebridge.com

Booklet Prospecting (www.bookletprospecting.com) is your source for helpful annuity lead resources. Art Gib is a freelance writer.

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