Should I Consider An Annuity For My Portfolio?

Are Annuities A Good Investment Choice?

annuitiesSelecting the correct investment vehicle for your retirement can be a difficult and tedious process.  The last thing you want to do is to make a wrong decision that sets you up for financial disaster before you reach retirement age.  Many individuals lean on annuities as a source of guaranteed monthly income during retirement years.  However, there are mixed opinions on annuities. The key is, before you jump into any investment, it’s good to have a pretty decent understanding on the investment details including; fees, taxes, risk, and liquidity.

So What Are Annuities?

Essentially, annuities are like putting a life preserver around your retirement savings.  If you’re goal is guaranteed income for the rest of your life, an annuity may be something to consider.  As a buyer, you would invest a certain amount of money into a specific annuity.  In exchange, that buyer can depend on a monthly check for a given number of years or even for the rest of his/her life depending on the terms of the annuity.

Is An Annuity A Good Investment Choice?

The typical person, who would buy an annuity, is someone who desires an investment with low risk, often guaranteed principal.  Any lower risk investment generally offers a lower rate of return and at times the high fees associated with annuities can make them a less desirable option.  At other times, depending on circumstances, annuities can also be an excellent choice.

How Much Can I Expect To Get Back From My Annuity?

The amount you receive back each month from an annuity depends on which type of annuity you purchase, how much you put into it up front, how long it is invested for, and how will the annuity performs.  The types of annuities are as follows:

Immediate Or Deferred Annuities:  Some annuities are effective immediately after purchase.  With an immediate annuity you can expect monthly payments immediately from the insurance company that sells you the annuity.  Deferred annuities, on the other hand, have delayed payments.  Meaning you can purchase an annuity at the age of 30 and let it mature until retirement (minimum age of 59 ½).  At retirement the total monthly check you receive is dependent on the total worth of your annuity portfolio.

Fixed Or Variable Annuities:  A fixed annuity is when you take a lump sum of money and place it in a low-risk annuity for a guaranteed fixed rate of return until retirement.  Variable annuities, are just that…variable.  The rate and return can cause your portfolio to be either more or less than your original capital depending on how the investment performs.  Variable annuities are more risky than fixed annuities.

So Which Annuity Is Right For Me?

Selecting the right annuity is largely dependent on your ability to take risk, your goals, and your stage in life.  With any annuity it is important to also consider fees, and other costs of purchasing the annuity.  For more information on whether or not an annuity is a good investment choice for you personally, speak to a Redhawk Financial Advisor near you today.


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