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Things You Need to Know Now About Annuities

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Annuities are a common feature of retirement planning, though they may be used to manage settlement money, as well. Here are the top things you need to know now about annuities. We’ll also address a few of the common misconceptions about annuities.

What Is an Annuity?

An annuity is not an investment per se. It is a contract with an insurance company or other financial institution.

That is why they’re often able to guarantee a certain rate of return, whether they’re promising 4% annually or a variable rate with a floor of 2% with a maximum return of 6%.

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Options Available for Your Annuity or Structured Settlement

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NoStructured settlements and annuities are financial products that you are probably happy about. In the first case, you probably received your structured settlement after going to court. The defendant knew that the case was lost, so rather than go through the motions of a court case that couldn’t be won, they opted to settle with you out of court.

Because a settlement is a lot of money to pay all at once, many times the defendant’s lawyers will offer you a structured settlement. They may even push it on you. In most cases, a lump sum should be available to you from the start, but a lot of plaintiffs feel that they received their structured settlement as the only available option, even if the monthly payments would not be sufficient to cover their monthly lifestyle needs.

Annuities are not quite the same thing. Unlike a settlement, you plan for an annuity well in advance. It is meant to cover your lifestyle expenses during your retirement, actually, or some similar time period. You, or a caring loved one, has been putting money away for a long time to fill up the annuity.

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Different Types of Annuities

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We posted various articles on annuities. Here is one attempt to explain what are the different types of annuities that exist today in US. Although I haven;t invested in annuities and probably will not do unless I get some compelling reasons to do otherwise. I always get perplexed if annuities are really smart investment option.

Annuities

Annuities are insurance products that pay out income, and often used as part of a retirement plan. Investors who want to receive a secure income in retirement prefer annuities.

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Are Annuities a Smart Investment?

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In the economic bust of 2008, we learned that easy credit is no way to stretch dwindling retirement funds. Many senior employees took early retirement trusting that their Market-dependent 401(k) would produce an income stream capable of sustaining their unexpected situation.

Annuities

When it did not, they turned to credit hoping to make it through to better days. As a result they wound up first in bankruptcy, then homeless, and finally destitute. If they and their employers had utilized annuities instead of Market driven investments to create retirement income streams, then a lot of grief might have been avoided.

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What Annuity Options are Available Post-Retirement?

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Retirement is something many of us will look forward to. Saying goodbye to the world of work, the daily grind and having to get up at 7am every weekday morning are just reward for decade after decade of turning up to our jobs on time, putting a good shift in and contributing to the economy in our own way. Once we retire though, the question of what we have to live on might soon arise.

Annuities

We might not necessarily contemplate retirement before we turn 40, but as we get older, thinking about the future is something we might have to do, especially as you can never be too sure what’s next. To provide for retirement, workers typically either rely on a workplace or basic state pension, but what other options are there, especially if saving for old age has been forgotten about?

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What to do With your Annuity Investment in Retirement Plan?

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Last time we talked about some do’s and don’ts of annuity investment.  Here’s a story about what to do with your annuity investment, if you are looking for some alternative. Let it be clear that if you are looking to rollover your annuity investment in to an IRA, you can only do it if your original annuity was bought under an IRA investment. Else you can’t roll over this in to an IRA account. Here’s an expert advice from CNN Money explaining the process.

Retirement Saving Options

I do not have any annuity in my retirement portfolio. I was planning to buy one but figured out that we are better served with employer 401(k) and TD Ameritrade IRA account that we have. We are young couple now and we can risk investing in variable return investment in our retirement account. We do not particularly want assured minimum fixed return that a typical annuity offers. If you have an investment already made in annuity and you want to cash out it, may this article help you.

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Some Do’s and Don’ts of Annuity Investment

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Annuity investments are payments made to an insurance company to save for retirement. The actual annuity is not the savings, but the pension you purchase with the proceeds of your savings. This provides you with a guaranteed monthly income until your death, and potential other benefits according to your specific type of annuity and the country you live in.

If you have a 401K, you can use the sum paid out to purchase an annuity. This will likely be the biggest single payment you will make in your entire life. If you have been paying annuity investments to an insurance company, either individually or through your employer, the same situation applies. If you also have an IRA the same will likely apply.

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