When you mention the words ’Life Insurance,’ most people know what you are talking about. Unfortunately, when you bring up the topic of ‘Fixed Annuities’ many individuals become confused. However, Fixed Annuity insurance vehicles are very easy to understand, widely available, and provide benefits that other retirement and income instruments cannot offer.
Fixed Annuities are insurance contracts that pay a set return and offer a steady stream of income for a determined period of time. The number of payments, the payment amount, and other policy factors will help govern the sum of money you must deposit to fully fund a Fixed Annuity contract. One popular “pay out” option is to choose a “life-time” income payment stream where you cannot out live the investment. Other fixed annuity advantages include favorable tax treatment, creditor protection, and stability.
Fixed Annuity Trends
The concept of a fixed annuity has existed for centuries. In America, the general public first experienced them at the turn of the 19th century. Interestingly, fixed annuities became more popular as the Great Depression ensued. At that time, people turned away from the failed banking system and saw the insurance industry as a “safe haven” for their money. Although they are not government insured, insurance investments are generally looked upon as an avenue for conservative returns.
In our modern society, annuities have assumed a bigger role and are frequently used to finance a variety of projects. It is common to see them used for estate planning, retirement income, legal settlements, and as a funding source for other types of contractual business obligations. With large stock market fluctuations becoming more frequent, Fixed Annuities can be viewed as an alternative to guarantee predictable returns.
Fixed Annuity Funding Options
Typical Plan Options:
- Single Premium Payment – If you have accumulated a lump sum of money to invest, a one-time deposit can be made to fully fund a Fixed Annuity. Once funded, you can choose to let the money grow tax-deferred or pick a payout option to receive an immediate income stream. The size of your income payments will be calculated by looking at certain criteria including how much you are investing, your age and gender, and the length of time you choose to receive your payments.
- Flexible Premium Payment – A smart way to begin saving money would be to make flexible payments into a Fixed Annuity. You can choose the amount to invest and the period of time to make payments. Once you have accumulated the desired investment amount, you can set when to start receiving your income stream. The size of your income payments will be calculated by looking at certain criteria including how much money you have accumulated, your age and gender, and the length of time you are to receive payments.
There are several things to consider when purchasing an annuity. First, annuities will not fit every type of investor or every type of need. However, understanding the basic areas of importance can help define what plan will work best for you. Here are some simple questions to ask yourself before you choose a Fixed Annuity. How do you want to fund your plan? When would you like payments to begin? How long would you like to receive payments? Are tax consequences and creditor protections important to you?
Who should consider a Fixed Annuity contract? Someone who wants to lock in predictable and stable returns that are not linked to the stock market and also has the ability to invest their money for the long-term. Additionally, have an independent agency like Peoples Health Insurance, LLC get prices on a variety of plan options from a number of companies. With rates and returns changing on a daily basis, it is important to get timely quotes before making your decision. Note: Certain plans may not be available in all areas.
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