Buying annuities are one popular option when adding to a retirement plan. However, there are some things you must be aware of before you begin the buying process, including the following:
Crediting the Annuity
There are a variety of ways an annuity is credited, and you can choose the one that is best for your overall financial needs. Average crediting each month gives you and even return despite the climate of the market at that time. You will not have any losses of gains during a down year. Uncapped crediting will not limit your overall gains based on a maximum interest rate. The financial institution that is servicing the annuity will instead take a fee that will decrease the interest made but not limit your earnings. Another option is blended allocation, which provides a portion of the interest paid to be based on the fixed and indexed return.
Beneficiaries and Death Benefits
Annuities will offer a benefit to your beneficiary upon your passing. If you leave most of your money in annuities, you should consider one that that has an enhanced death benefit. These include those with stacking interest, guaranteed interest rates, or paying out the value of the income account upon the death of the annuity holder.
Adding an Income Rider
One significant benefit of annuities is the option to add income riders. This ensures that you will have a guaranteed lifetime income. Before you can begin adding income to the account, there can be a waiting period for your rider. However, it is an ideal option if your employer does not provide the benefit of matching your retirement contributions in your other retirement accounts.
There are variable rates and terms for income riders, but they can be very beneficial at creating an additional income source. You should also know that there are going to be fees for income riders, if applicable. Some may be free while others will charge a percent of the value of the account.
Withdrawals
There will be a time period in which you will not be able to withdraw from the account. However, annuities provide the best opportunity to gain access the money against other retirement planners. If you need regular cash on hand, ask your annuity provider when the ideal withdrawal times are so that you can have access to as much liquidity you will need between those timeframes.
Investing in annuities is a really great way to diversify your retirement portfolio. Before you jump in, be sure to talk with a financial planner so that you have the best annuity to meet your financial needs and goals.
