26th Jul 2010
What You Should Know Before You Purchase An Annuity
When you are considering different options for retirement planning you may wish to consider an annuity. Before you purchase an annuity however, you should be familiar with the three major types of annuities available and how they will relate to your retirement.
A fixed annuity is a no-risk retirement investment opportunity. When you purchase this type of policy the principal will always be available to you for your retirement. Your money will be invested into low or no risk bonds creating a moderate return on your investment. You will receive monthly payments from the annuity for the time specified when you purchased the plan. This plan does require a lump sum payment to open the account.
An index annuity is a medium risk investment policy that will pay you either monthly when you retire or in a lump sum. These policies can be purchased by either lump sum or continuing contributions. Your policy is invested into the stock market in medium risk stocks and generates a moderate return. You will do more than create a retirement account you will begin to generate wealth. Corrections in the stock market can affect these policies.
A variable annuity is much like an index annuity. However, the money from the policy is invested into higher risk equities and generally creates a larger return. Your monthly payment will vary each month based on the performance of the stock market. There is risk involved in this product because so much relies on how the stock market performs.
You should also realize that all annuities are insurance policies not investment accounts. Annuities are not protected by the FDIC so you must be careful whom you purchase an annuity from. Only purchase an annuity from an insurance company considered stable. If you take the time to research these products prior to purchase you will ensure that you find the right retirement product to fit your lifestyle.
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