What Are Annuities?: First off, most people think of an annuity as a sort of paycheck during retirement — except your young self is essentially paying your older self, by making an investment with one of many structured settlement companies, and then taking back your own money (with interest).
Second, some people choose to treat annuities more like investments rather than complete retirement plans, but this is a much riskier option because it depends more on the economy and the stock market than on early planning for guaranteed investments.
Weighing the Positives With the Negatives: For people who are used to receiving a regular paycheck and want to have someone else providing some financial guidance (we all know how easy it is to blow your money on something that you’ve “just always wanted but never could afford,”) fixed annuities in particular are a great way to ensure financial stability during retirement.
Additionally, even though annuities are considered to be investments, you’re technically “buying” annuities from insurance brokers working for structure settlement companies. This means that you get to defer paying taxes on your money, as it waits patiently for you to get old.
That being said, many financial advisers try to steer their clients away from annuities due to the number of hidden fees that are involved (mostly fees stemming from early withdrawals or cancellations). Because of the high fees involved with earlier cancellations and withdrawals, many people end up wanting to “sell” their annuities upon deciding that they can’t wait to turn 59.5 years old before using their money.
Your Options: There are plenty of options when it comes to buying annuities, and this flexibility often attracts people to buying annuities, because they’re able to decide how much to invest, how long to wait before cashing in on it, and how often payments will be sent. The key, as with any major retirement planning, is to make sure that you do your research very thoroughly and consult with an experienced financial adviser before making any big decisions.
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