What Are Annuities In
Contrast To Other Investments?
There are so many investment choices that we wonder what are annuities and how do they fit in?
Once you understand the annuity definition and the basic types of annuities available, the next step is to compare them.
While trying to do the best for our future retirement, we are presented with a variety of investment options to choose from such as 401k, IRA, CD’s, savings accounts, mutual funds, etc. So what are annuities in comparison to other methods?
There are similarities and differences to the 401k, IRA, CD’s and other types of investment possibilities. Each one has its strengths and is beneficial under certain settings.
The benefit of an annuity is that it allows you to choose when you want to receive routine income. There is no need to wait for your retirement. If that is what you want…
You are more in control of the interest rates and when to start the payments back to you.
So, what are annuities against the others? Here is a simple comparative analysis.
You Have a Guarantee of Funds
Your annuity funds are placed with an insurance company. This company guarantees your funds and is responsible to see that you get paid according to the agreement...
Unlike the 401k, IRA & CD there is no limit to the amount that you can place into an annuity. (And, the mutual funds and stock market have no guarantees at all...)
Insurance comapnies have annuity ratings and maintain state regulated levels of reserves and capital.
You Determine The Interest
You can determine if the interest is to be fixed. Or you can set it to be variable according to the options you choose (similar to mutual funds)...
This method provides you with better control, unlike the 401k, IRA, CD, mutual funds and stocks. As your interest method and amounts are set, you do not have to be a finance investment wizard. You do not have to micro-manage your account unlike the 401k, mutual funds and stocks...
You Determine Time Period
You can choose to receive monthly/quarterly/annual income after one month of your initial deposit (immediate annuity). Or your money can grow until a set future date (deferred annuity).
Unlike the 401k or IRA, you don’t have to wait until your retirement to receive regular income without penalty.
Mutual funds and stocks have their own rules. There could be penalties as well as taxes on gains, which your tax advisor can fully advise you on your 1040 form.
A CD has its similarities. However, one usually picks from specific choices that are available at the time of investment. On the other hand, an annuity can have a fixed interest for a much longer period of time...
Less Financial Restrictions
The 401k and IRA have specific financial restrictions on how much can be put in. The CD has rules of its own, and their offers change from time to time.
An annuity has a set agreement, from the beginning, which does not change unless specified in the contract...
Financial Advisor Updates
Again, the 401k, IRA, CD, mutual funds and stocks, all have their unique advantages. There are times when those are the best choices based upon the issues at hand. However…
Rules and regulations can and do change. Thus it is always best to speak with a specialist to see what the choices are for your specific scenario...
Get a free annuity quote - let us help guide you through the options to make the best choices for you!
Or, get a free consultation from a Certified Financial Planner to go over your plans to help you make the best decision for your needs.
"You'll be glad you did!"
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