Investing Tips for the First-Time Annuity Buyer


October 14, 2010
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No one else will prepare for your future better than yourself. You have to take the necessary steps to ensure that you will enjoy continuing income even when you are no longer working for a living. The earlier you make your preparations, the better it is for you.

If you want to live off your investments, one particular instrument that you can make use of are annuities. Annuities are contracts that are entered into by individuals and insurance companies. These contracts guarantee the distribution of money invested by individuals back to them for a particular period of time usually for the entire lifetime of the insured. If you are a first-time annuity buyer, it is important that you understand the different options you have in annuities. You have to keep in mind that the annuities that you purchase should fit your future financial goals.

There are two general types of annuities: immediate and deferred. Immediate annuity is the type of annuity that you purchase in one lump-sum premium payment to entitle you to collect regular pay-outs from your annuity contract’s inception. The deferred type, on the other hand, is the one you want to purchase if you wish to accumulate funds for regular guaranteed pay-outs to you later on in your life.

Premiums are paid in installments for deferred annuities. And then, regular pay-outs start at a certain time, usually upon reaching retirement age, and continue until a predetermined time. Usually, these annuities are paid out for the entire lifetime of the annuitant or sometimes even for the lifetime of the surviving spouse. As an annuity buyer, you need to be informed about several other factors that could affect the accumulation of your annuity investments. There fixed and variable annuities that you can opt for. Fixed annuities guarantee a fixed amount of pay-outs while variable annuities have fluctuating amounts of pay-outs depending on the investment decisions made on your annuity account.

 
 
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