Is an Annuity Right for Me?


 is annuity good for me

If you have come to our site, chances are that you have been reading or hearing a lot of things about annuities. Since annuities are complex, they may have been simplified too much by some financial advisers which incurred horror stories ending in lawsuits. However, it is not because some investors got fooled by their advisers that annuities are evil.


In fact, the right question should not be “is an annuity right for me?” but “which kind of annuity match my needs?”. Annuities can be customized according to your personal financial situation. You can also combine more than one product to make sure that everything is covered.


Should I buy an Annuity?


If you go through the different types of annuities, you will learn more about each of them. You can also speak with a representative for free and inquire more information. But for now, let’s keep it simple and try to draw the picture of an investor with an annuity. Here’s a few hint to know if you are the kind of investor who could benefit from an annuity:


#1 You are concerned about your retirement plan. You see retirement coming in a few years and you want to make sure you will have enough money once you stop working. Being financially secured is one of your priorities.


#2 You are familiar with investments. You have been saving money for retirement and you have built your nest egg throughout your working years. You invested in either bonds, CDs, mutual funds or even managed your own stock portfolio. However, you feel uncomfortable with the market volatility and you wish to secure a part of your income at retirement.


#3 You are seeking for a stable stream of income. The bulk of your retirement plan is based on amount withdrawn from your investments. Instead, you wish you could have some kind of guarantee you will be receiving money.


#4 You are concerned about longevity. You are well aware that healthy people live longer today. Therefore, chances are you will still require money at the age of 85 and you do not wish to count on Government pensions to support your lifestyle and needs.


#5 You tend to be risk-averse toward your retiring years. As an investor, you might have been more aggressive with your asset allocation in the past but you do not wish to risk it all anymore. You are seeking for a more stable way to invest your money in order to avoid economic crashes.


#6 You have a high tax bracket. Since annuities are less taxed than other type of investments, high tax bracket investors tend to benefit more from this product.


#7 You are pessimistic. If you don’t believe the stock market will generate high returns in the future and if you are more a “bear” than a “bull”, annuities can avoid you to invest in equity. You should like the security coming with this kind of contract.


#8 You are a Women! Since women have a better life expectancy than men, their need for an annuity is bigger. The investment return should be better for the women than for the men.


You Don’t Need All 8 Points to Buy an Annuity


The above mentioned points are just guidelines to tell you if you are likely to benefit from an annuity or not. Technically, if you share one of those point alone, there is a high chance that a part of your nest egg should be use to purchase an annuity.


If you are still unsure if you should purchase an annuity, you can speak with an advisor for free now.


Annuities & Retirement How to Retire Without Worries

lonWill I have enough money to retire?


This is a question that most people are asking themselves. It gets even more crucial questions as you turn 50 and you see retirement coming forward. Governments won’t be the most generous around with their social pension plans, your employer is probably not under any guarantee to pay a fixed pension and your savings… well you simply hope to not retire before the next crisis.


But what if you could enter in a contract guaranteeing you that you will get paid each month? No more worries, no more uncertainty, just a sustainable income stream for your retirement. Annuities could be a great solution for your retirement plan by providing you several advantages. Here’s a list of a few reasons why annuities and retirement go well together:


You Can Start Investing in an Annuity Today and Retire Later


One of the most unknown advantages of an annuity is the fact you can buy an annuity now and start saving money inside the contract. This is called a deferred annuity plan. You are basically building up your annuity while you still earn a pay check in exchange of a pension like payment at retirement. The interest rate paid by the annuity could be fixed (linked to certificate of deposits and bonds investments) or could be variable (linked to the stock market performance). You are not only building your own secured pension plan with an annuity but you also defer taxes on potential gains realized inside the annuity.


An Annuity Helps You Budget at Retirement


A common mistake with young retirees is to start spending money like they never did. You might be sitting on $500,000 or more in your retirement account (like a 401(k) or a 403(b)), but it could melt faster than you think if you don’t budget properly. A new car and a few oversea trips later and your $500,000 nest egg could drop to $400,000 within a few years.


After the purchase of an annuity, you will receive a steady payment on a monthly basis. Therefore, you will have to budget your retirement needs according to your annuity payment. This is a great way to ensure you don’t fall short after a few years of crazy spending!


The Annuity Insure You Against the Longevity Risk


Do you know one of the most important risks for retirees is to outlive their savings? 50 years ago, a retiree could budget until he is 75 and would not risk to lack of money before his death. Today, it’s not rare to encounter retirees who are 85, 88 and even over 90! My two grandmothers are still living and they are 90 and 92! If they would have bought an annuity at the age of 60, they could have spent a lot more at retirement.


The Life insurance company pays you according to your chances of being or not being alive in the next 10, 20, 30 years. Since they insure a lot of individuals, they calculate their break even point (and their profitable point) where they pay more for a few people who live over 85 and cash the money from the annuity from those who decease earlier.


The Annuity is a Great Tax Management Tool


If you need to withdraw money from any type of pension account, you are deemed to pay an important amount of taxes to the government. Nobody wants to retire and owes money in taxes! As your income is more limited, tax planning becomes crucial.


The annuity payment allows the investors to spread its tax bills across his entire retirement instead of paying taxes on lump sum withdrawals. If you purchase an annuity with cash coming from your bank account, you will also benefit from a tax advantage since part of the annuity payment will be considered as a return of capital and won’t be taxable.

A Retirement Plan Should Analyze Annuities


If you go see your financial advisor for a retirement plan, he should definitely analyze the possibility of adding an annuity or a combination of annuities to meet your retirement needs. There are several uncertainties around retirement and annuities are part of the tools to reduce your worries at retirement.


If nobody told you about annuities, you should speak about it with an advisor for free now.