The basic definition of annuity is a fixed sum of money that is paid to someone each year for a fixed amount of time. When it comes to your financial portfolio, annuities are investments or insurances that entitle you to a yearly payout.
There are several different types of annuities that you can invest in. Here are the basic types:
- Variable:A high-risk plan that involves you choosing your own investments and earning money off their returns.
- Immediate:This plan involves you investing a sum of money and earning an immediate and steady stream of income.
- Fixed:This plan guarantees you a fixed, steady stream of income and interest.
- Fixed Index: This plan earns you a fixed income based on a specific equity-based index.
If all this seems a little confusing, that’s natural. This is why we suggest that you seek help from a professional financial advisor.Here are some things that you need to consider when deciding what type of annuity is right for you:
- Are you willing to wait years for your wealth to accumulate?Annuities can take years to build up any value in themselves. You will receive some type of regular income, but it will probably not be enough to take care of all of your family’s expenses. You should look somewhere else if you are looking for a large, immediate payout. Annuities are for those whose main goal is earning money for the future.
- Do you need to save money for anything in particular?Your financial advisor will be able to tell you which annuities will be able to help you with your specific goals. For instance, you might be saving up for retirement. Your decision should depend on what type of income you need now, how much money you’ll need in the future, and how soon you’ll need it.
- How much risk are you willing to shoulder?Each type of annuity has a different level of risk. Variable annuities are considered high-risk, because they rely on the success of your own investments. If you don’t want to take a lot of risks, you should choose another type of annuity.
- What tax advantages do you stand to gain?Some annuities that are considered high risk also have more benefits. This is true when it comes to tax advantages. Ask your financial advisor what type of tax advantages come with each type of annuity. It may be worth a little risk to set aside funds that will not be subject to high taxes.
- How much are you willing to pay to protect your wealth?You will have to pay fees for every type of annuity. At first glance, you’ll notice that most annuities are more expensive than other forms of investment. You have to weigh the cost of annuities against what you stand to gain from them. Annuities come with a unique set of benefits. Carefully consider the pros and cons before you decide if it’s worth it to invest in an annuity.
- Are you choosing a reliable company? You will have to pay fees for every type of annuity. At first glance, you’ll notice that most annuities are more expensive than other forms of investment. You have to weigh the cost of annuities against what you stand to gain from them. Annuities come with a unique set of benefits. Carefully consider the pros and cons before you decide if it’s worth it to invest in an annuity.
You don’t have to navigate the financial world alone. Contact the professionals at SOGO if you want help choosing the right annuity for you.