Given the chaotic nature of the financial markets and the rising threat of inflation these days, people close to retirement are worrying more about coping financially when they stop working. If you are in a similar situation, take a look at fixed income annuities (also known as fixed-index annuity). This is a type of investment account that lets you make contributions towards your retirement with a guaranteed rate of return. In simple terms, you can contribute to a fixed annuity today with the guarantee of how much you’ll earn back in interest in the future.
Here are 5 reasons you should be considering a fixed income annuity:
-
It provides guaranteed income when you need it most
The best feature of the fixed income annuity is that you are assured of steady income for a specified period of time – sometimes for as long as you are alive. Even if the market is going through a down period, you still get paid. This is important because it gives you the luxury of living through your retirement knowing that you are financially secure and will always be able to meet your needs.
-
Your principal is protected from market conditions
As mentioned above, your principal is always protected in a fixed-index annuity. That means when the stock market goes through an uptrend, you get returns as stated in your contract. However, even if the market has a negative rate of return, your capital doesn’t lose a cent. Instead, the amount stays the same until the next bull run when you start to earn returns again. If you’re worried about how volatile the market is, knowing your money is safe will surely give you some peace of mind.
-
Annuities offer tax-deferred interest accumulation
Any interest earned on a fixed income annuity is tax-deferred. That means interest will accumulate without being taxed. So, there’s more room for your balance to grow and it will do so at a faster pace than taxable investment plans. These taxes will be deducted when you start getting income from the annuity, but at that time, you will probably be in a lower tax bracket – meaning less of your money goes to the government.
-
They give you more flexibility than other retirement accounts
Another awesome thing about fixed income annuities is how many ways they can be customized. To contribute to this type of account, you may choose to make a lump sum or monthly, quarterly, and annual payments. Also, unlike 401(k)s and IRAs, there’s no limit to how much you can contribute.
Furthermore, some annuities make it possible to withdraw a portion of your balance ahead of schedule and without penalties. You may also change how much income you get monthly depending on how your needs are evolving, and you can decide to transfer the rest of your balance to your beneficiaries when you pass away.
-
Fixed annuities let you leave a legacy for your loved ones
Many fixed-index annuities provide the option to transfer any remaining balance in the investment account to beneficiaries. This gives you a chance to leave a legacy for your loved ones and ensure that they have financial security in the event of your passing.
While a fixed income annuity offers a lot of advantages to retirees, it is important to note that it has some downsides as well. So, before investing, it may be prudent to discuss with a retirement planning specialist and learn how you can make the most of it. You can easily do that by clicking on this link and scheduling a free online consultation.
