Top 4 Reasons to Buy an Annuity

By Compuquotes Team on February 17th, 2009

Why buy an annuity? Check out these top 4 reasons for doing so.

  • Safety of investment or principal

If you burned the midnight oil and worked all your life to give yourself that comfortable retirement, you would not want to put your investment at risk unnecessarily. Annuities, compared to other investment vehicles, are meant to be safer and more reliable as they are less susceptible to market risks through sound investment and tax cover schemes. Annuities, when properly researched out, will have been covered by the financial reputation and strength of the providing insurance or investment company with years of track record to its name. Reserve requirements on insurance and investment plans require huge amounts of resources and any less reputable insurance firm may not be able to put up the kind of money required.

The money should be in safe investments as people who go for annuities are usually retirees or soon to be retirees wanting a comfortable ending to their lives. Especially when acquired in lump sum, all the more that the investment should be safe and sound as the retiree will no longer have money on his pocket after paying all the lump sum.

  • Tax cover

For deferred variable annuities, you pay taxes only at the time when you actually begin to use the money and reap the benefits, not earlier. Your money is thus optimized and returns are maximized. The principal amount of your investment grows faster as you get interest that is tax free at the present. With other forms of investments or money market accounts or savings, interest income earned is taxed immediately. This reduces the income generated by your money currently.

  • Accessibility and flexibility

With annuities you get to receive your money at your options, when and how you want to receive it. You have the flexibility as to the amount to be paid to you, the frequency of the payment, the length of time you would want to be continually paid, even the person you would want to benefit alongside or after you. In naming your beneficiary, the account is paid to him or her, allowing instant access at no probate costs.

  • Better returns

You get better rates interest wise for your money invested in annuities. Annuities statistically are better returns-wise compared to other investment vehicles. Annuity plans will almost always stipulate minimum rates that they guarantee over a period of time. You are assured of fixed rates if you so choose.

With the assured returns, and better ones at that too, annuities guarantee the safety of your principal and interest. You are assured of lifetime income as you originally set out for when you acquired the annuity. Everything is up to you, as you can set annuities to outlive you and not the other way around.

With the foregoing top 4 reasons to buy an annuity, your retirement plan is waiting to be redone for the better. If you go for an annuity, keep these considerations in mind to continuously reassure yourself that you have made the right investment choice.

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