What's Great About Annuities

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If you are like most people these days you probably know little or nothing about annuities. You may have heard a few sales pitches or horror stories but you may not know about the tremendous advantages that this kind of investment provides.

 

The truth is that the right kind of annuity can be one of the best retirement investments that you can make. It offers some benefits that no other kind of financial instrument provides. Some of the great things about annuities include:

 

A Regular Stream of Additional Income

We’ve all heard the horror stories about retired people running out of money and having nothing but Social Security to live on. An annuity can provide you with a regular stream of income that lasts until you die. In fact such investments were originally created to guarantee income to the elderly and the disabled.

 

An annuity is a contract between you and an insurance company. In the arrangement you pay the insurance company a specific amount of money and the insurer agrees to make regular payments to you or a beneficiary until you die. The big advantage to this is obvious you receive a regular payment that you can use for any purpose. Unlike long term care insurance annuity funds can be used to pay for anything: including groceries, utility bills, taxes, even your cable bill.

 

Annuities are Guaranteed

The best thing about annuities is that you will probably get the money. If the contract is issued by a good insurance company you will get the payments as long as it is in effect. Unlike a stock IRA or mutual fund there is little possibility of a top rated insurance company collapsing or stopping payment. Even if the insurer can’t make the payments most states guarantee annuities for up to $100,000.

 

Most retirement investments including IRAs, Mutual Funds, ETFs and 401Ks are not guaranteed so they can lose money. Even investment real estate can lose value and it will come with added costs such as maintenance, insurnace and taxes. Few other investments come with such guarantees.

 

Annuities are Hassle Free

If it’s set up right the only obligation you will have with an annuity is to cash the check every month. If that is too much work for you, you can set the plan up to make an electronic deposit to your bank account. There is no reason to keep watching the stock market or monitoring an IRA. This means funds can come in every month to pay bills or provide some extra cash.

 

Many plans can pay out until you die and will keep paying to your account to cover your bills even if you end up in the nursing home. A 401K or IRA will not automatically pay out but an annuity will.

 

Annuities are Tax Deferred

An annuity is one of two investments that allow you to save up an unlimited amount of tax-deferred income. The other is an insurance policy and the drawback to that is obvious, insurance policies only pay you when a claim is made. A life insurance policy only pays out when die, a long term care policy only pays when you need long term care.

 

You can put an unlimited amount of money into an annuity and deduct it from your taxes. This money will then come back to you later on in the form of regular payments. There are serious limits on the amounts that you can put into IRAs and 401ks, there is no such limit with annuities. That means you can use to set as much of your income as you want aside in a tax-deferred retirement investment.

 

To add icing to the cake, there are no income limits on tax deferred contributions to annuities. That means you can put as much in as you want no matter what your income level is. This is one tax-deferred retirement investment that even people with high incomes can take advantage of.