Annuities for Seniors
Annuities are sometimes used as retirement investments. Since
there are various types of annuities, it can be difficult to understand the
different types of annuities and whether they are right for you.
Annuities are a contract under which an insurance company
pays you income at regular intervals in return for a premium or premiums you
have paid. Some annuities can pay an income guaranteed as long as you live, which
is why they are often marketed as retirement income. Many annuities offer a
cash surrender benefit.
There are many different kinds of annuities and each carries
a different level of risk and guarantees. This is one reason it is important to
look closely at what you are considering and take your time making a decision.
Here is some information on the various kinds of annuities:
- Immediate Annuities:
With an immediate annuity, payments begin immediately upon purchase. This
product is for an individual who needs immediate income from his/her annuity.
- Deferred Annuities:
With a deferred annuity, payments begin at some future date that is usually at
retirement. With a deferred annuity, you can invest either a lump sum all at
once or make periodic payments. The funds grow tax-deferred until you are ready
to begin receiving payments.
After deciding which type of annuity is right for you, you
need to decide upon the investment type – Fixed
or Variable.
- Fixed: Fixed
annuities offer a guaranteed rate of return that is typically over a period of
one to 15 years. A popular variation of a fixed annuity is the Equity-Indexed
Annuity in which the rate of return is derived using an outside index, such
as a stock market index, with a guaranteed floor.
- Variable: Variable
annuities enable you to invest in a selection of portfolios called
sub-accounts. The annuity payments under a variable annuity can increase or
decrease depending upon the investment experience of the sub-accounts.
Even if you find an annuity that seems to fit your
investment risk level, you still have to ask whether any annuity is right for
you. Keep in mind that annuities are to provide income for the long term and
should not be bought to reach a short-term financial goal.
Sound advice when considering any financial transaction is
to avoid high-pressure sales tactics and to take your time in deciding upon the
appropriateness of the transaction. You don’t need to buy anything today or
right now. If a deal seems too good to be true, it probably is.
More information on and a list of good questions to ask
about annuities is available through the National Association of Insurance Commissioners.
Need More Help?
For more help with annuities or to get answers to your insurance-related questions, visit our Consumer Services Bureau for help!