An annuity for immediate payment is typically paid with only a premium or “pay by purchase” and requires the income payments to begin within 12 months once the contract has been made. Income can be guaranteed while living or for a specific period of time. Because immediate payment annuities guarantee a specific amount of income, limited access they offer retreats, and only by some annuity options. Even if you choose a choice of annuity that allows withdrawals, it is important to remember that take money out of your contract may have a significant impact on the dollar value of the future payments of annuities.
Fixed rate annuities are contracts issued by insurance companies. There are two types of fixed annuities: deferred and immediate. Immediate annuities start to pay income immediately as its name suggests, and deferred annuities allow that the balance of the account grow for future use. Fixed annuities are annuity contracts that are guaranteed by the insurance company and does not invest directly in stocks or bonds or real estate. Because contracts are guaranteed and non-variable contracts, values are guaranteed by the insurance company.
Insurance companies are in the business of risk management. People buy insurance to reduce their personal risk in a given situation – in the case of annuities people the purchase to avoid the risk of running out of money. Since insurers are trusted with the management of both capital, they are very good at managing money wisely. Insurance companies use sophisticated investment techniques to manage the dollars of premiums that receive and utilize mortality statistics to properly quote their annuity contracts.
Financial strength ratings are ratings to insurance and other financial institutions by the rating agencies. Financial strength ratings are a measure of the stability of a company. When considering the purchase of an annuity, please note the financial strength of the company. Stronger qualification, the safest investment. Even insurance companies most valued rarely go bankrupt, and that they honor their obligations, but a little task is a good idea.
When all else fails, every consumer may resort to State guarantee funds. Guarantee funds operate in each State and protect consumers in the case of an insurance company sinks. While there are limits on the coverage, it is an additional layer of protection.
Fortunately, there are a few sources of retirement income that are guaranteed. One is a work of defined benefit pension plan and if you have one, you are among the few lucky ones, since they are becoming scarcer. Another source of guaranteed income is Social Security. It can be helpful, but is not designed to replace 100% of your income, so you’ll probably need to Search from other sources.
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