What Kind of Annuity Is Right for You?

Annuities can help you save money for retirement and create an income that won’t run out. Before you make such an important investment, however, it’s smart to research and consider which type of annuity is right for you.

Fixed Deferred Annuities

If you’re getting an early start on preparing for retirement, fixed deferred annuities might be a good choice for you. You can invest as much money as you want in them for extended periods of time with a guaranteed return, safe from market risk. To maximize profit, make you have a long life expectancy and that you have emergency funds on hand, since withdrawing money early will incur a fee.

Immediate Fixed Income Annuities

This is also protected from market risk and gives you a fixed payment; the conditions you set can be either for life—or for a married couple, for the life of whoever lives longest—or a set number of years. Keep in mind that you will have to invest more if you want your payments to adjust for inflation, thus ensuring that your payments are enough for you to live on.

Deferred Income Annuities

Like fixed deferred annuities, these annuities involve a period of time in which you pay premiums before you begin receiving money. As such, it’s smart to ensure that you have emergency money and that your life expectancy is lengthy before investing. You may also want to invest more to ensure the payments you receive will be adjusted for inflation.

Variable Deferred Annuities

The deferred payments of this annuity have one key difference: they aren’t protected from the risk of the market. While this presents a chance to grow your investment, you can also lose money, and any growth your investment sees will have a commission taken off of it. If you’re really counting on the payments from an annuity, the risk simply might not be worth it.

It’s no secret that financial planning can be stressful and confusing. When you finally reach retirement age, however, having investments like annuities will allow you to sit back and enjoy yourself.