Deciding on the right annuity for you implies having a look at the intent behind your investment and deciding on the type of annuity that perfectly matches your preferences. There isn’t any one type of annuity that’s suitable for everyone, for the reason that each investor is unique, with different needs and a different financial and life situation in general.
There are 4 basic types of annuities. All these types work in different ways, and so each one is a suitable choice in different scenarios. For you to choose the best annuities, it is advisable to know and understand each of the annuity types.
The Purpose of Your Annuity. The kind of annuity that is right for you is dependent upon the reason why you are investing in the first place. Generally speaking, annuities are for income, either now or in a give future time. Even so, the details of your financial and life situation should be an important factor in choosing the type that is most effective for you.
- If you’re searching for the highest potential payout and you are older and do not have any beneficiaries to pass your cash on to, you might want to decide on an immediate annuity for your property planning needs. Should you prefer a guaranteed rate of return and wish to minimize taxes by deferring payment, then consider a fixed annuity with good terms, and make sure that the account provides the same deal for all rates.
- In case you are a younger investor planning for the future, in a very high income tax bracket and buying with money that didn’t originate from a traditional IRA, then consider a variable annuity. Even though these are not suggested by annuity experts for retirees because of high fees of about 2 .5% – 4% annually, they can absolutely work in this situation. If, on the contrary, you prefer some safety for your cash along with the potential for growth, you really should think about getting an indexed annuity. This way, you can take part in gains when the market increases but will not lose out when it declines.
- If you need to have money for income and want security for your assets without having to lose it’s liquidity, a hybrid income plan is worth your consideration. A hybrid plan is a combination of the immediate and the fixed annuity, therefore you get the market upside with no downside, and a floor percentage that your money will increase even if the market falls. This particular plan offers slower growth than investing your money directly in the market, and there are still fees about 0.4% to 1% each year, however it is the best choice for most people.
Follow this link to understand how does a Hybrid Income Annuity work:
Bear in mind that the very purpose for your investment determines the type of annuity it should go. Never choose an annuity that perhaps worked for your friend without even analyzing your own financial and life situation.