What to Look at When Shopping for the Best Annuities
Many people know the importance of investing for the future. At some point in time, you will want to retire and stop working. You could also be forced into an early retirement by injury or retrenchment. The idea is that while you are working and able to earn, you should be putting away some money for your future. What is important is that the money you put away works for you. When the time comes for you to retire, you can then do so knowing that you have enough money to live off and meet your financial needs. This means that when you are shopping around for investment options, there are several things that you need to keep in mind.
Know the Different Types of Annuities
There are different types of annuities that are suited to different types of people. Much has to do with how much risk you are willing to take in your investment portfolio. Some investments will give you a better return in the short term and others are focused on the long term. The important thing is to understand the different types of annuities. Knowing what each one is about will help you to decide which option suits you best.
Are Fixed Annuities the Best Investment for You?
Most people will tell you that a fixed investment is the most secure type of annuity. It is also one of the simplest types of annuity. In a fixed annuity, you will typically choose a time period for your policy which is usually 10 or 20 years. As long as the policy runs, you will pay a set monthly premium into the policy. In return, you will earn a predetermined and fixed amount of interest per year. The benefit of a fixed annuity is that when the policy matures, you will receive a guaranteed amount back from your investment. If you want security then this is a good type of annuity to consider. You just need to keep in mind that you may not necessarily get the best return on your investment. The investment value you get out at the end of the day may also not provide you with sufficient income due to inflation and the devaluation of money over time.
Consider What You Will Need in the Future
It is a known fact that over time the actual real value of money devalues. Think back 10 or 20 years. Back then a million dollars seemed like an absolute fortune. Today though things are now measured in billions. In real terms, a million dollars won’t go nearly as far as it once might have. In the same way, don’t look at the payout value of your annuities in today’s terms. Think of it in tomorrow’s terms. Think of what the cost of living might be in 20 or 30 years when you want to retire. At the very least, it will have doubled or tripled. It is a scary thought but preparing properly can ensure that your investment provides you with sufficient income into the future.
Getting a Better Return with Variable Annuities
One way to get a better interest rate and return on your policy is to take advantage of the markets. Variable annuities allow you greater flexibility in your investment but they do also require that you or financial advisor knows what they are doing. The premiums you pay generally stay the same but the interest rate you receive may change over time because it is linked to the markets. Usually, variable annuities have the flexibility built in to be able to increase your monthly contributions if you want. The important thing to know about variable annuities in that the annuity you will receive at the end of the investment period will be closely linked to how your investment has performed in the markets. If the markets are good then you will have a nice lump sum waiting for you; however, there is also the risk that you could lose on your investment if you don’t invest wisely or if you take too many risks.
Life Stages at Investment
It is also important to consider what life stage you are in. If you have only a decade or two until retirement then you will need to plan very carefully and probably invest a little more. This may be difficult when you have a mortgage and school fees to pay at the same time. In general, it is always a good idea to start investing when you are younger so you do not have to face that balancing act later in life.
Annuity Rate Shopper.com was started to simplify the annuity buying process. Comparing between competing immediate annuity to help figure out which one is best suited for your needs. Visit online today.