Fixed annuities are particularly thought of because of their safety. You can’t really lose money due to stock market declines when you yourself are a part of it. Yet, fixed annuities are not always safe.
Even though the chances of losing money in the market do not arise in case of fixed annuities, one thing that you must keep in mind is that there are other aspects of them that may make them unsafe. The first being there is lack of liquidity. Yes there is a tax postponement component, however, you must always consider that if you need the money, you might be needed to pay certain amount/amounts of penalties to collect it. This is called surrender charges. Often these charges can turn out to be quite high on your annuities. This is what makes them riskier as far as liquidity is concerned.
The rating of the particular insurance company is also a major factor of consideration. Though it is known that ratings of companies are not at all the final word to be believed as far as safety is concerned, yet doing your research is always the best option. The safety of your annuities is directly related to the safety of the company, hence it is essential that while choosing an insurance company you do your diligence and that you do it properly.
Yet, it is not all bad. The current returns generated on fixed annuities is one of the biggest positives of entering into such an account. This leads to a consistent and sufficient income stream to compliment your other income, be it after retirement or before.
At the end of the day, entering into a fixed or a variable interest annuity should be a decision left on you for which the necessary research and preparations can be taken by only you. Your investment needs is almost a major factor on which this decision would depend.
Annuity is nothing but a type of insurance deal which paybacks a certain amount of money back to the investor after a fixed amount of time. These are just like the investment certificates provided by the banks. There are various types of annuities available in the market. Certain annuities provide you with fixed annual rate while some of them provide you variable rate of interest. When you invest in annuities then your total amount keeps on increasing according to the rate of interest you have invested in.
There are annuities available in the market which pays you back the amount throughout your lifetime. These are also known as pensions. There are certain annuities that provide you death benefits. By death benefits, we mean that it will act similar to the insurance. But as it is every good thing comes along with a defect, so is it with annuity. Because of its defects it is advisable to invest in it after you have secured your retirement.
Lottery winning is a gamble and huge winnings are on the lot (fate). Perhaps that is why it is called lottery. People who are regular lottery players and place annuity on it may or may not lose faith on its credibility. Then they might look for options to safeguard them.
There are companies that buy your lottery annuities and make you secure about your finances. Obviously they have a rub in this. You get lesser amount than what your annuity commands. But at a crucial juncture, it seems a wise policy to get at least a reasonable sum of your investment. This is especially the case if you are in dire straits.
They may also offer you valuable suggestions on how to keep your finance in the future. They would teach you a trick or two about tax evasions. They will make a check of your annuity and proclaim your annuity is worthy of being bought or not.