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Top 3 Reasons to Choose a Fixed Annuity

By Compuquotes Team on April 14th, 2008
Annuity

Living comfortably while you're young and enjoying the fruits of your labor when you reach your prime is achievable. The only problem is that many people don't see the importance of having a sound retirement plan until it's too late for them. To be assured of your future and that of your children, and live a life of a king upon retirement, an individual should have a good retirement strategy, one of which is a fixed annuity.

Learn more about annuity and the top 3 reasons why you should choose fixed annuity over other types of annuity plans:

Purchasing an Annuity

Annuity is the best retirement plan one can acquire. This is because annuity is very stable as compared to other financial instruments. The annuity holder simply entrusts a lump sum payment to the annuity issuer who turns it into a monthly stipend much like an income.

The annuity issuer, who is usually an insurance company, will turn the lump sum payment into a financial investment such as stocks or bonds that result to capital gain for both the company and the annuity holder.

An individual must know of his payment capacity and especially his needs before he talks to a broker for an annuity investment plan. A retirement plan can go haywire if an annuity holder failed to do his homework well and as a result, had picked the wrong annuity plan.

Advantages of fixed annuity

1 - Income comes in on a monthly basis

If an individual has a number of annuity investment plans, he can schedule the payout earlier even before retirement. This payout is like a secondary source of income that will be handy during emergencies such as losing a job.

Many annuity holders commit the mistake of putting all their eggs in a single basket. It's unwise to place your money in one annuity investment plan. The individual should toy with the idea of segregating his lump sum into a number of annuity investment plans.

2 - Fixed annuity is stable and flexible

With fixed annuity you can start with a small investment and gradually increase your plans as your money grows or when extra money is available.

Also called a flexible premium annuity plan, this form of fixed annuity affords you the chance of changing your annuity plan before its maturity date. The advantage of a flexible premium annuity plan is that an investor can assess if he needs to increase the premium payment of his annuity thereby also increasing the amount of his return.

This is very important especially at times of inflation rates and money value fluctuations. The value of money is not necessarily the same after a 10 year period. Therefore, an investor should project what he expects to be the income that he needs and he can only do this with flexibility using the flexible premium annuity plan.

3 - It's like a reverse life insurance plan

Letting your annuity investment plan work for you on a monthly basis is the best option for you. It protects you against prematurely losing your money when retirement days come as compared to having a lump sum of money and carelessly spending it all.

Individuals who purchase annuity investment plans have an option to annuitize or they can tell the annuity issuer that they want to receive payout until their death. It is because of this feature that annuity investment plans are chosen by many people who wish to get the best out of their hard earned money.

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