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The Basics Of Annuities For Retirement Income

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Are you looking for ways to make sure that you are set for retirement with the money that you need? You may be interested in an annuity as a way to invest your money. Here are the basics that you need to know about annuities.

What Types Of Annuities Are There? 

You'll find that there are three types of annuities that you have to pick from, with each having its own unique advantages. A fixed annuity will receive a set return on the investment, regardless of the stock market conditions at the time you cash out. While they are low-risk, they do have low returns as well. 

Variable annuities are tied to the performance of an investment portfolio. They have a higher return, but run the risk of volatility. IIndexed annuities are a mix of the previous two types. There is a minimum guaranteed return but does not have the potential for high returns that a variable annuity has. 

How Does An Annuity Work?

An annuity will pool money from various investors, and that money will be invested in a variety of different ways. This includes bonds, stocks, real estate, and other types of investments. The payment that you receive depends on the type of annuity you selected and various other factors, such as your age, the payout period length, and how large the initial investment is. For example, all factors may be the same except for the payout period, and a longer payout period could result in more money over time.

What Are The Advantages Of An Annuity?

The main advantage of an annuity is that you can generate reliable income in retirement, with all that growth being tax-deferred. The payout can also be quite predictable based on the type of annuity you select, which gives you peace of mind about the minimum payout you'll receive in retirement.

What Are The Disadvantages Of An Annuity?

The downside to an annuity is that there can be commissions and fees associated with them, which is essentially money taken out of your retirement. It can also be difficult to access your money if you need to take it out early. If you are confident in your skills investing the money on your own, that may be the better option.

Think you're ready to invest in an annuity? Reach out to a financial planner in your area for their assistance with setting one up.