It can be challenging to put money away for retirement!
Given the economic uncertainties and availability of many options, you may be overwhelmed with choices. However, the real planning starts once you have determined how much you must save for a comfortable retired life.
When it comes to retirement savings, there are many options. One such option is annuities! They are considered an effective way to supplement your income for retired life. If you are wondering whether annuities are the right choice for you, this post is for you!
Follow along to learn all the reasons why you should consider annuities for retirement funds.
You can get safe and steady returns
With an annuity, you can be assured of your money being in a safe place that also gives steady income over a long time period. Moreover, this money continues to grow via the interest earned. Hence you may want to find the best available rates.
The payments that you get may be a lump sum amount or in the form of periodic payments, and, in some cases, a combination of both. This is not all! With annuities, your savings are also tax-deferred. It means you do not have to pay income tax on the annuity until you opt to withdraw funds.
Moreover, since there is a guaranteed rate of return associated with annuities, they are ideal if you are risk-averse. You can avoid the volatilities and risks associated with investments like real estate, stocks fu,nds, etc.
You get guaranteed a rate of return
Some annuities, usually fixed or indexed annuities, offer you a guaranteed rate of return. While the rate of return can be greater than the minimum, it is reassuring to know there is also a floor on that rate of return.
In this regard, it is important to understand how does an indexed annuity differ from a fixed annuity! A fixed annuity guarantees a minimum return rate, which can be adjusted periodically or increased each year. Indexed annuities, on the other hand, follow an index like the S&P 500 and provide returns that are capped based on the index’s performance.
You can get regular payments
Sadly, employer-sponsored pensions are becoming rare in the private sector. In such an instance, annuities present a valuable option for individuals who want to secure their financial future. Annuities can provide contract holders with guaranteed monthly payments, which can be a real lifesaver when it comes to budgeting during retirement.
These steady payments can ensure that you have a reliable source of income and can enjoy your retirement without worrying about how to cover your everyday expenses. Moreover, if you choose to retire early, annuities can serve as a financial bridge until you start receiving your Social Security benefits.
You can get better returns than other investments
Investing in an annuity can offer better returns than many other financial products, provided you choose the right one. Some annuities may provide higher rates than traditional long-term certificates of deposit or government bonds.
For example, the average rates for longer-term CDs tend to be quite low compared to some annuities. Meanwhile, shorter-term CDs usually offer even lower returns. Similarly, long-term government bonds also tend to offer modest rates, but they may still be lower than what certain annuities can provide.
It offers survivor benefits
Annuity contracts come with different options for what happens to the annuity when you pass away. These options can vary from one provider to the other. Usually, you can choose beneficiaries who will receive the funds if the account holder dies.
Moreover, some annuities let survivors keep getting payments after the original owner’s death. This could be a joint option for a spouse or a set period option for someone else you name as a beneficiary.
Final note
Annuities can serve as a highly viable option for growing your retirement savings. They combine the features of both an insurance policy and a retirement account, thus providing you with different ways to increase your money over time.
This flexibility, in particular, has made annuities more popular recently, as many individuals see the benefits they can bring to their financial planning. Hence, with an annuity, you can enjoy growth on your investments and secure a reliable income for the future.
