Fixed Annuity for Retirement
Planning for your retirement is an exciting time in life because it represents the culmination of your life’s work. While hammering out the details might seem tedious as you parse through competing programs and strategies, the results speak for themselves once you are finally able to kick your shoes off and enjoy the retirement lifestyle you have worked so hard to achieve for you and your family. Perhaps one of the best ways to secure that future is with a fixed rate annuity account that aims to provide you with a steady stream of income in your golden years. Should you choose to go this retirement funding route, you will want to consider these four important factors when purchasing a fixed rate annuity.
4 Important Considerations When Purchasing a Fixed Rate Annuity
Single vs. Flexible Premium
When purchasing a fixed rate annuity, you have a couple of options when it comes to paying for the account. You might choose to buy it with a lump-sum purchase, known as a single-premium, or you might choose to make your purchase with an initial down payment with subsequent monthly or quarterly installments. The former option, single premium, allows for contracts that are either immediate or deferred, while the flexible premium approach can only be used for the purchase of deferred fixed annuities.
Immediate vs. Deferred
When the terms “Immediate and Deferred” are used in relation to fixed annuities, they mean at what point in the contract the buyer can begin receiving payment from their accounts. Holders of immediate annuities are eligible to receive payment within a year of establishing the account, which is why single premium purchases are eligible for these types of accounts. Generally speaking, and the amount varies by insurance company, but most accounts require minimum outlays of $5,000 to $10,000. Flexible premium accounts are paid out at an agreed upon time in the future, and they don’t mandate that a fixed sum be deposited every year.
Non-Qualified vs. Qualified
The tax advantages of the two types of accounts are similar in that they both allow for tax deferred savings until the account holder receives a disbursement. Non-qualified annuities are purchased with after tax dollars while qualified accounts are bought using pre-tax dollars. Regardless of the type, each account exacts a withdrawal penalty when removed prior to the age of 59.5 years.
Lifetime Income Payout Options
One of the biggest fears of the aging process is that you will outlive your money, and lifetime income payout options are in place to alleviate those fears. Simply stated, the lifetime income payout offers guaranteed payments throughout the course of the account holder’s life. It should be noted that those looking to leave an estate behind that lifetime payment options typically expire with the death of the account holder.