- If you are looking to
increase you investments without gambling on stocks or
locking up your money in bonds, annuities from life
insurance companies may be the way to go. Annuities are
investments that you make in the life insurance company
for a small upfront premium, which guarantees you
consistent lifetime payout. These can provide guaranteed
income if you are retired or disabled.
Annuities come in several forms depending on the length of
time and the interest you wish to receive. Fixed annuities
are the most stable, with a set interest rate over a
period of one, five or ten years. After the period
expires, a new interest rate is set. You can add things
like stocks or bonds to variable annuities to increase
their value but be warned: variable annuities don’t have a
fixed rate and can become worthless if the stocks and
bonds fall. If you’re looking for fast payment, try
immediate annuities, which give a single lump-sum payment
and begin paying out as soon as you purchase.
Other annuities include single premium deferred annuities,
commonly known as SPDAs and charitable gift annuities.
These both have tax conditions that make them unique from
the others. Single premium deferred annuities are commonly
used in retirement because they can be purchased with a
lump sum but payouts are not taxed until payment arrives
at a later date. Charitable gift annuities are generally a
contract between you and a foundation or university where
you make a large donation in exchange for future payouts
at a fixed interest rate. For these you need to specify
whether you want an immediate annuity or an SPDA based on
tax conditions.
There are many benefits for owning annuities in an
insurance company. Most importantly, they provide
guaranteed payments for the rest of your life, insuring
you for disability or retirement. You can modify the terms
of you annuity to span longer than your entire life,
assuring that you will always receive payment at your
fixed rate and you can even do so without a physical exam;
annuities are not connected to the state of your health.
Finally, taxes on annuities are usually put off until you
have received the actual payment, which means you can make
interest on the annuity and then on the money you receive
before taxes. Annuities are an important part of any
financial plan, so talk to your insurance company about
investing in this dependable source of income.
