Lifetime Annuities And Your Financial Plan
Does the world of high finance make your eyes glaze over? If investment lingo and financial planning lulls you into a boredom-induced coma, you are far from alone. Annuities, for instance, are not exactly sit-on-the-edge-of-your-seat exciting, but they can provide you with a comfortable and worry-free retirement. And, surely, that will add some bounce to your loafers.
If you’ve heard the word “annuity” a gazillion times, but aren’t actually familiar with what the term means, now is your chance to find out. Pull your finger away from the “back” button and read on. There is, after all, nothing more important–or exciting–than financial freedom and your future retirement.
“Lifetime Annuities” Explained in a Non-Boring Way
Creating a blend of practical annuity information and excitement is a rather lofty goal; however, it can be done. (Thank God for exclamation marks). An annuity typically involves you remitting a lump-sum payment to an insurance company with the agreement that they will pay you an agreed upon rate of return for the remainder of your life.
Before you jump to the conclusion that an annuity is just another boring investment to add to your portfolio, think again. It is actually quite exciting! You are, in effect, betting that you will lead a long and healthy life–and, subsequently, get the most return on your lump-sum investment. As “Annuities: How They Work and When You Should Use Them” states, if you die too soon, you will get back from the insurer far less than you paid in, but on the other hand, if you live too long, you may get back for more than the cost of your annuity.” It’s better than Vegas.
The Exciting Benefits of the Lifetime Annuity
How are you doing so far? Have you nodded off yet? Here comes the really exciting part–what’s in it for you?
Everyone loves to avoid paying the taxman and, thanks to the fact that annuities do not have annual contribution limits, you can build up even an even greater tax-deferred retirement nest egg.
A lifetime annuity can also enable you to maintain the lifestyle to which you have grown accustomed. Yes, according to Wells Fargo’s “Annuities Explained,” they can provide you with a reliable, predictable stream of income for the rest of your life, reducing concerns you might have about living longer than your money.
And a definite way to make your investment portfolio a bit more exciting is to diversify. Remember, variety is the spice of life and adding an annuity to the mix will definitely spice things up.
The Dark Side of the Lifetime Annuity
While it has been nice watching all of you jump for joy, the lifetime annuity does have a dark side. After all, you can’t have excitement without exposing yourself to a certain degree of risk.
The two largest risks involve the security of your lump-sum payment. USA Today‘s “Is An Annuity a Good Way to Guarantee Income” reminds readers that “you can be a pretty big loser if you pass away early. If you buy a lifetime annuity for $1 million at age 60 and die at age 66, you’ve only received $300,000 back from the initial investment.” And, in many cases, you cannot pass the remainder on to your heirs. Plus, if you purchase an annuity from an organization and said organization collapses, in many cases you will lose your investment.
If you can’t afford to lose your lump sum, you need to keep these things in mind. If you are looking for excitement, however, entrusting a large investment into an “on the brink of failure” company will provide you with one heck of a roller-coaster ride.
As one can see, the lifetime annuity is an invigorating breath of fresh air in what is typically a rather snore-starting topic. If you enjoy a lengthy retirement, you can walk away with significantly more than you invested.
Either way, NewRetirement.com asserts that “lifetime annuities are a really great way to guarantee that you will maintain your quality of life in retirement.” And that peace of mind must be worth something.
And, by the way. You’ve made your way through a financial article without nodding off once.
What is your take on lifetime annuities?
