Annuities FAQ

By Compuquotes Team on November 25th, 2008


When it comes to investing and your future, there are plenty of questions that you probably have, and there should be. Investing in your future and your retirement is a very important decision and should never be taken lightly. There are many different ways to save for the future, plan for retirement, and make investments to make like a little easier, however choosing between which investment method is best for you can be quite confusing and stressful. Annuities are one of the most popular and efficient ways of investing in your future, but there are many frequently asked questions that should be reviewed before moving forward.

First of all, the most commonly asked question when it comes to annuities is actually, “What is an annuity?” If you are going to consider annuities as an investment, you should probably start here and have a basic idea of what you are getting into. An annuity is an investment sold primarily by insurance companies. There are several different types of annuities but they all have the same two basic properties including whether the payout is deferred or immediate, and whether the returns are variable or fixed (guaranteed). Annuities with deferred payout mean that investors will receive payments at a later date while annuities with immediate payout begin rewarding investors almost immediately after purchase.

Fixed annuities offer guaranteed returns by investing in low risk securities which are typically government bonds while variable annuities involve a little more risk because the results will vary with the performance of the funds where the money is invested, which is usually the stock market. Depending on your current financial situation and the risks you are willing to take will always determine which types of annuities are best for you and your family. It is also important to note that once the payment begins on a fixed annuity, it will not change.

Many people aren't sure if annuities are right for them, and if they can actually guarantee income for life. The fine print of most annuities is quite difficult for the average person to understand, which is why most people tend to avoid annuities as their chosen investment methods. However, when done correctly, annuities can offer income for life, but in many cases, you will not be able to leave any funds to your heirs.

If you are having trouble deciding if annuities are the right choice for you, do not sign up for one with your insurance company or independent company. Always do your research before signing the dotted line and be sure that all of your questions are answered before doing so. Remember, this is your financial future, something that you should never throw caution to the wind for. When deciding between annuities and other types of financial investments, you may just want to speak to your financial planner. He or she will be able to explain whether a fixed or variable annuity is best for you, or if annuities are ideal for you in the first place. Remember, not every type of investment is right for everyone.

Featured Insurance Quote
Facebook 470 flares Google+
470 flares ×